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"BROADSHEETS" 
ON NATIONAL 
FINANCE 



A 



PUBLISHER'S NOTE 

WITH a few exceptions all the chapters comprised 
in this book represent a series of " Broadsheets " 
contributed to the public press at the author's own expense 
from January, 1920, to April, 1921. 

They are now gathered together into more permanent 
form in response to many requests and in a patriotic desire 
to support those who work for the world's true weal and as 
an offering of reasoned counsel to all labourers — whether 
of hand or brain — who would know more of a subject which 
is the key to their own and their Country's well-being. 



" BROADSHEETS " 
ON NATIONAL 
FINANCE 



By 

SIR OSWALD STOLL 



485126 



LONDON : PUBLISHED BY WILLM J. ROBERTS 
AT TEN CHARING CROSS ROAD 11 MCMXXI 



CONTENTS 

PAGE 

Publisher's Note ........ 2 

To THE LOftDS OF THE TbEASURY .11 

[Pint printed in The Pall Mall Gazette, Jan. 80, 1920.] 
Hyat«rioAl fln^TiAml outcry — Mr. Secretary Lansing's Report to th« 
United States Senate— Eoonomio preponderance of Amenca in 1 920 
aanued by Ti?«gUw«^ on the advice of its experts — Sir Oswald Stoll's 
intuition and prophecy relating to this in 1916 ! 

To THE Lords of the Treasury . . . . .18 
[First printed in The Times and The Pall Mall Gazette, 

Feb. 8, 1920.] 
The verbal counters of financial experts — Speech of Mr. Reginald 
McKenna on January 29, 1920, dissected and criticized, as to 
Currency, Price of Commodities, Demand and Spending Power of 
the public — His figures as to amount of Currency held by the 

Sablic in 1914 and in 1919 compared in relation to the amount of 
told represented therein — The arbitrary limitation of Currency ; 
does "Currency" mecui "Medium of Exchange" or "Legal 
Tender " T — The present principles a tissue of fallacies. 

To THE Secretary to the Treasury, U.S.A., Mr. Carter 
Glass .......... 17 

[First printed in The Pall Mall Gazette, Feb. 6, and The 

Manchester Guardian and The Daily Telegraph, Feb. 7, 

1920.] 
Mr. Carter Glass' ono-timo " sound " views on bank-note issues 
compared with his apparent change of opinion subsequent to his 
appointment as Treasury Secretary — The issue of Federal Reserve 
Notes as Legal Tender by America is a financial blunder which 
will be converted into a boomerang — The Discount System in 
Europe^ by Paul M. Warburg, quoted — America refusing Credit for 
Bills on Europe adversely affects her own people — "Hie fallacy 
underiying America's Federal Reserve Note System is one not 
observed by Paul IL Warburg, but is observed and execrated by 
Amarioans who cannot trade under it ! — ^The author offers a 
' ' sans solution ' ' of the Financial impasse which Mr. Carter 
Glass has created. 

To Lord Inverforth ....... 21 

[First published in The Pall Mall Gazette, Feb. 11, 1920.] 
England's debt to foreign countries, principally the United States ; 
how it was incurred and how partly liquidated — Lord Inverforth's 
strange logic — Thi6 real remedy for prevailing high prices, according 
to the author — What will result if the remedy Iw not applied — Our 
Exporters of Coal and raw materials are selling the Coxmtry's 
Birthri^t for a Mess of Pottage and bringing its manufacturing 
industries to a stemdstill. 



6 CONTENTS 

PAGE 
To THE MaSTEH of THE MiNT ...... 24 

[First published in The Pall Mall Gazette, Feb. 16, and The 
Daily Express, Feb. 17, 1920.] 

Hie anomalous position of this Government Contractor, forced 
by circumstances to reduce the quality of his products, although 
not chfinging the descriptive tickets on the price ! — The resultant 
' ' fall " in Legal Tender will cause the price of commodities to rise — 
The shop-keeper and his customers nonplussed and angry — How the 
United States was saved from the Greenbfick Crisis affords no hasia 
for optimism by us in our present crisis — An unprecedented sta- 
bility tmd prosperity could be assured to the British Empire by the 
adoption of the author's suggestion with regard to Credit-right. 

To THE Sewing Cotton Committee ..... 28 
[First published in The Daily Express, Feb. 21, 1920.] 

The profits made by Messrs. Coats, Sewing Cotton Manvifacturers, 
utilized as a text upon which to btise a sermonette on the dimin- 
ished purchasing-power of money in 1 91 9 in comparison with 1 91 3 
— The reason for soaring prices is to be f oiind in the lowering of the 
Gold Standard. 

To Financial Critics 30 

[First published in The Daily Express, March 6, 1920.] 

llr. Robert Benson's views on the cause of Expansion of Currency. 

The Cardinal Error of Socialism ..... 31 
An open letter to Mr. Ernest Bevin. 
[First published in The Daily Express, March 31, 1920.] 

Is the destruction of the Capitalist System a sound poUcy ? — ^The 
deadly pfutiUel of the destructiveness of the world war — Mr. 
Bevin's standard of life for the wage-earner can be secured by the 
extension, not the destruction, of the system he condemns — The 
Capitalist System contains a pesirl of great price, viz., the instru- 
ment of Nation-wide Individualism, accessible to the wage-earner 
under conditions set forth in the author's scheme which he explains. 

" The Economic Consequences of the Peace." . . 35 

[First published in The Pall Mall Gazette, April 12, 1920.] 

Why Germany cannot pay — The Economic Consequences of the 
Peace, by John Maynard Keynes, quoted as special pleading by 
the Economic notability of the day — The magnitude of England's 
war debt and who will pay it — Man and machine power and the 
inevitable desperate conflict between investors and the working 
rl i m i — Bank Credits for productive purposes the solution of the 
ESoonomio problem. 



CONTENTS T 

PA«B 

BUDORTING FOR DI8A8TBR . . . .89 

[First published in The Daily ExpresB, April 23, 1920.] 

The estimaUHl sum total of wealth produced in the United Kingdom 
in one year — How a huge percentage of this is proposed to be aquan- 
dered by the Chancellor of the Exchequer — National Bankruptcy 
the result — Some Buggeetions to obviate working loasea on Govern- 
ment enterprises — Mr. Chamberlain condemning his own Budget — 
Tlie true remedy lies in helping, not hindering, indvistry by the 
adoption of the author's scheme of Credit-right — Is there a oon- 
apiracy to kill it by SILENCE T 

A Tax on Turnover : Suggested Modification ... 44 
[First published in The Financier, May 21, 1920.] 

Mr. Chamberlain's Tax on Turnover a strong condemnation of his 
own Ezcess-Profite duty and Corporation tax — The international 
masters of organized finance the masters of the world, with the pro- 
ducers as their victims and slaves — a Tax on finished products : 
how it would work — The Entertainments Tax, cited as an example 
of such a tax, would entail only a small cost for collection — The 
Editor of The Financier adds a few words of comment. 

"What must we do to be Saved ? .... 49 

[First published in The Daily Express, May 12, 1920.] 

A critical condenmation of the Budget — Joseph's coat of many 
colours a model of sartorial propriety compared with the patch- 
work garment called Parliament — The patches are named and 
are found to be a Chromatic outrage — So, too, are the public utter- 
ances of individual Ministers — Mr. Bonar Law cited as an example 
— Whilst, strangest of all, " Laboiu: " looks on and applauds that 
and those which axe working to enslave it. 

The Coming Crisis ....... 58 

[First published in The Daily Telegraph, June 8, 1920.] 

The most terrible economic upheaval the nation has ever known 
— Futile ideas for its averting occupy the public mind — How 
the CSiancellor could avert it, had he the wisdom and the courage 
— National Finance versus Financier's Finance — A warning to 
Capital and Labour — The times are ripe for the establishment of 
the author's scheme for Credit-right. 

The Chancellor's Red Light ! ..... 56 

[First published in The Daily Telegraph, June 16, 1920.] 

A critical examination of Mr. Chamberlain's statement that 
" Capital must be conserved for public and for business needs " 
— What is meant by "Capital" — The low Bcuik Reserve and 
higher Currency Note issue are the results of Treasury gambles 
— The Chancellor's acknowledgment in set terms that the Qovem- 
ment and the Country is absolutely controlled by the financial com- 
munity — Is there a purpose behind this public acknowledgment 7 
If so, will the Nation heed the red lamp which the Chancellor- 
Signalman waves T 



CONTENTS 



PAGE 



Tragic Finance: Is the Bank Rate 7 per cent, or 24 per cent. ? 61 
[First published in The Daily Telegraph, June 22, 1920.] 

A deceptive Bank Rate — Pointed questions aa to the reason for 
tliis heavy Rate «uid the secrecy regarding it — How it hits the 
manufacturer and the trader — Disquieting figures relative to our 
trade with countries where monet€iry exchange is against us 
— A suggested " Committee of Commercial and Industrial Safety " 
with a list of those who should be excluded from it. 



Stop the War between Finance and Industry : it Menaces 
THE State 1 . . . . . . . . .64 

[First published in The Daily Telegraph, July 6, 1920.] 

Finance as the vital power in the Nation's Economic life — How 
the Financier wages a silent war of mancsuvre and conspiracy 
against Conunerce «uid Industry — The strangle-hold exerted when 
the Nation is weak — ^The workers' " ca' c€mny " a natural conse- 
quence of restricted credit — The methods of the Financiers 
examined — How to avert the Wtir of Industrial Independence 
which is inevitable in certain circmnstances. 



** The German Great Banks and their Concentration " 68 
[First published in The Daily Telegraph, July 16, 1920.] 

Stinnee the nominee of International Finance — His sardonic 
optimism — Dr. J. Riesser's work on The German Great Banks 
and their ConcentraUon proves the stupendous money power 
behind Stinnee — How the power has been built up luider the close 
cooperation of Stinnee and Atigust Thyssen — A remarkable 
revelation. 



The Russia that is Rising from a Paper Money D^bIcle 74 
[First published in The Daily Telegraph, July 27, 1920.] 

The depreciation of Legal Tender Currency in Russia — How it 
paved the way for Dictator Lenin — The dictator's policy working to 
enslave the people for purely destructive pvuposes — Russia, under 
Lenin, a menace to the peace of the world unless England, by her 
example, gives Russia a lead — " Be just and fear not " the beet 
poUcy for all in the interests of self-preservation ! 

Forsaken by America !....... 78 

[First published in The Daily Telegraph, Aug. 4, 1920.] 

Have we lost the Great War ? — America really helped \is when she 
instituted the financial blockade of Janxiary, 1918, but she 
prevented a victorious march on Berlin by substituting the Armis- 
tice ! — Our own Government makes war upon its own people — The 
policy of Abraham Lincoln is what we require — Will Mr. Lloyd 
George rise to the occasion and wear the mantle of Lincoln ? 



CONTENTS 9 

PAOS 

Thb Cbisib ! " A Little Child Shall Lead Them." ... 84 
[First published in The Daily Telegraph, Aug. 17, IMO.] 

The Children's Newspaper makitm m momentous sonooiioement 
— The maritime rights of the riwr Danube and its meaning — 
International Finance as the newer to flout, embarrass and oheek- 
mate the British Premier I — ooviet Russia as the sexton of certain 
seaboard countries of Europe^Upon the British Premise's adop- 
tion of a sound Monetary Standard and Credit-ri^t depends toe 
future well-being of this country. 

Our Legal Tender Lapse ...... 88 

[First published in The Daily Telegraph, Aug. 26, 1920.] 

The wiadom of John Locke contrasted with the superficial devices 
of John Law — Yet our Treasury prefers the latter ! — The insta- 
bility of BO-called Secuntiee due to their variabiUty : Gold the 
true HtAndard — Mr. Stanley Baldwin's agreement re The National 
Debt and it« repayment — Alexander Hamilton and the ' ' shin- 
plasters " — Bills of Exchange are not commodities — Why the 
rate of Exchange is against us in America — ^The U.S.A. Federal 
Reserve Board and not our Trectfury controls tiie cost of living in 

Strikes, Lock-outs and Financial Concentration . . 96 
[First published in The Daily Telegraph, Sept. 15, 1920.] 

The three great prizes, so-called, of up-to-date Political Ek:onomy — 
The elusive value of Financial Concentration — Why Lock-outs have 
Uttle National Value — How and why Strikee have no value— 
— The antitheses of all three set out and explained. 

Notes on Alternative Taxation and Conditions to those 
Involved in the Last Budget ..... 101 
[First published in The Daily Telegraph, Oct. 18, 1920.] 

How to provide against imemployment, coal-strikes and other 
disturbances amongst the workers — Budget Estimates bound 
to be excluded — ^The restoration of the Oold Monetary Standard 
and the Establishment of Credit Right are the only methods by 
which to counteract iinreet and social upheavals — Unsound features 
of the Budget examined — Some stiggestions as to Alternative 
Taxation. 

*' Work While ye have the Light ! " . . . .110 
[First published in The Daily Telegraph, Nov. 4, 1920.] 

The clouds of Economic and Social upheaval are preventable^ 
Horrors of a Monetetry D^b&cle — How they were and are produced 
in America, France and Russia — The unavailing plocM of French 
Statesmen during the Revolution — H. G. Wells on Russia in the 
throes of des tiu oao a A plea in support of our Cheque System. 



10 CONTENTS 

PAOS 

He. McKenna on " Money and Foreign Exchange." . 118 
[First published in The Daily Telegraph, Nov. 25, 1920.] 
The subject of International Exchange is iinderstood by few leading 
bankers and merchants — Mr. McKenna does not understand the 
nature of money — His confusion of the two terms " Currency " and 
"Money" — Conant's Principles of Money and Banking quoted 
— Goschen and Foreign Exchanges also quoted — Mr. McKenna's 
arguments are weighed and found wanting. 

An Open Letter to the Viceroy-Designate of India. . 128 
[First published in The Daily Telegraph, Jan. 14, 1921.J 
The great crisis in British relations with India is due to the depre- 
ciated value of the Rupee — Palgrave's Dictionary of Political 
Economy quoted on the subject of hoarding in India — The 
reason for such hoarding — Dealers in Silver rub their hands delight- 
edly whilst India s\i£Eers and our relations with her are jeopardized 
— ^The ' ' Indian Coinage Act" of 1 906 is to blame — An eloquent plea 
to Lord Beading to save the situation : suggestions to that end. 

yfrvL Germany Win Yet? 184 

[First published in The Daily Telegraph, Feb. 1, 1921.] 
England on the edge of a precipice — Germany's debt and how it 
should be paid — Does the proposed 1 2 J per cent. Tax on German 
exports really meet the case — The possibility of Germany repudia- 
ting her debt to the aUies — Figures for thoughtful people. 

German Indemnity: Notes to Bearer ..... 189 
[First published in The Daily Telegraph, Feb. 8, 1921.] 

Germany's Notes to Bearer — The attempt to make German 
paper good Currency in «J1 the Allied countries — This would make 
Germany the conqueror, not the beaten foe — Commendatore Gian- 
nini playing with fire — The author's suggestiona to the Allies on 
collecting the indemnity. 

Legislative Corks on Troubled Industrial Waters . 142 

[First published in The Daily Telegraph, April 2, 1921, and 

The Manchester Guardian, April 4, 1921.] 
The Trade Resolutions on the Protection of Key Industries and the 
Prevention of Dxmiping and Balancing of Exchange — The " Pro- 
tection " we require is protection from such resolutions — The 
author shows how their net effect will be to produce more unem- 
ployment and demands for further doles whilst the back of Industrial 
concerns will be broken not only in this but also in other financially 
enslaved countries — A challenge to the Chancellor of the Exchequer 
to explain how our present Legal Tender is functioning to the 
detriment of National Interests. 

The National Agony !....... 146 

[First published in The Daily Telegraph, April 6, 1921. J 
The Politicians who do not know and will not learn the ABC 
of National Economics — How the contraction of Credit stopM 
the production and circulation of commodities and services — A 
grave warning to the Politiciaois who know, but will not apply, the 
remedy for the disease which is causing the National Agony. 



TO THE LORDS OF THE 
TREASURY 

SAVE the country from the Experts and the Experts 
from themselves in the present hysterical financial 
outcry ! 

The Experts are responsible for the crisis ! 
The Star reports that Mr. Secretary Lansing has said 
in a report to the United States Senate : — 

" The United States, THROUGH NO EFFORT 
OF ITS OWN, has come into a position of eco- 
nomic preponderance comparable to that which 
was coveted by Germany and which she sought 
to attain by means of aggression and force." 
— January 29, 1920. 

Through whose efforts, then, has this been accom- 
plished ? 

Through our efforts, on the advice of our Experts ! 
Sir Oswald Stoll wrote in The People^s Credit 
published early in 1916 : — 

" Will our Government rise to the occasion, 
and with the necessary encouragement of regu- 
lated enterprise obtain that indisputable world- 
power in the interests of our safety and inde- 
pendence which one great nation has SO FAR 
FAILED TO OBTAIN WITH BLOOD AND 
IRON AND * FRIGHTFULNESS,' BUT WHICH 
ANOTHER NATION MAY YET OBTAIN BY 

11 



12 "BROADSHEETS" ON NATIONAL FINANCE 

MEANS OF DOLLAR BILLS? Or shaU we 
lie rocked in the cradle of the deep asleep, or in 
the midst of danger bury our head in sand and 
refuse to believe what, having blinded ourselves, 
we cannot see ? "■ — Chap. VI., page 153. 
The People of the United States, as a People, are 

no more to blame for the present situation than are the 

People, in general, of the British Isles. 



TO THE LORDS OF THE 
TREASURY 

BEFORE it is too late examine well the verbal coun- 
ters used by those financial experts who are powerful 
enough — if their views are endorsed — to direct British finan- 
cial poUcy. 

Begin with the speech of Jan. 29 made by THE 
RIGHT HON. REGINALD McKENNA. This speech is 
suggested by way of compliment to Mr. McKenna as, admit- 
tedly, the best known of the powerful men of to-day who 
are skilled in conventional High Finance. 

The following are a few extracts from it and notes 
thereon : — 

" The most popular prop>osal for reducing prices is to 
fix a limit to the currency note issue." 

NOTE. — Here the term " currency " is used as equiva- 
lent to " legal tender for the payment of any amount " 
{vide Treasury Notes). 

** What is the relation between the increase of currency 
and high prices ? '* 

NOTE. — Here the term *' currency " means media of 

exchange in general^ including bank deposits in 

their character of spending poxcer. 

"It is an accepted doctrine that there are three fac- 
ts 



14 "BROADSHEETS" ON NATIONAL FINANCE 

tors governing the price of commodities, demand, supply 

and cost of production." 

NOTE. — Here the terms demand, supply and cost of 
production are limited to the commodity side of 
the facts. The term " price " is not defined but 
is treated as quite understood, and its character 
as A SPECIFIC QUANTITY OF LEGAL TEN- 
DER OF UNCERTAIN QUALITY {also subject 
to demand, supply and cost of production) is entirely 
ignored. 

" Again, chiefly owing to higher wages, cost of pro- 
duction has risen greatly, but in the sequence of events 
it has generally followed, not preceded, the higher prices." 
NOTE. — There is ambiguity in the word " owing.''* 
However, Cause must always precede Effect. There- 
fore, as there is a connexion between cost of pro- 
duction and higher prices, and the higher cost of 
production has " followed, not preceded," the higher 
prices, the latter must obviously be the cause, not the 
effect, of the higher cost of production, which is not 
therefore " chiefly owing to higher wages." More- 
over, " higher wages " being included in the term 
" cost of production " mu^t also be caused by higher 
prices. 

Thus wherever {as in the United Kingdom 
to-day) higher prices are caused by Legal Tender 
of a low standard or quality, e.g. paper mainly, 
instead of gold, Legal Tender is the underlying 
cause of higher costs of production, higher wages 
and higher prices ; which three factors then work 
in a vicious circle of their own. 

"Demand, measured by the purchasing power of the 
public, has increased enormously." 



"BROADSHEETS" ON NATIONAL FINANCE 15 

NOTE. — Here '* demand " as subject is particular in 
a logical sense and concerns only the commodity 
and services side of demand facts. It entirely est- 
dudes demand FOR purcheuing power {not neces- 
sarily legal tender) BY the public. 

** As demand grows prices rise." 

NOTE. — But prices {in a transaction as distinct from 
a quotation) are Legal Tender. Even while *' demand 
grows " prices may FALL if the Legal Tender 
is changed in quality from paper to gold. 

** First of all I will take the figures of currency." 

NOTE. — Here " currency " is synonymous xcith both 
limited and unlimited legal tender t *' i.e., gold, 
silver, copper coin, and bank notes.*'' 

The speech estimates that currency (in the last-named 
sense) held by the public in 1914 was £53,000,000, as against 
£202,000,000 in 1919. 

NOTE.— The speech does not indicate that the Z5S,000,000 
of 1914 equalled more gold than did the whole 
£202,000,000 of 1919. 

" The actual spending power of the public is gauged 
by the total amount of currency in circulation added to 
the total amount of bank deposits." 

NOTE.— The term ''the public** is used in the sense 
of ** the community as a whole " and its *' actual 
spending power ** is said to be the full amount of 
currency in circulation, plus bank deposits, WITH- 
OUT ANY DEDUCTION WHATEVER FOR 
INDEBTEDNESS!— not evendeduction of the amount 
of a cheque in the post, although the cheque may 
reduce deposits to thai extent twice over : {I) by 
wiping out a credit in one bank and (2) by can- 
celling a loan-deposit in another. 



16 "BROADSHEETS" ON NATIONAL FINANCE 

— and so on through the speech, part of which, of course, 
is masterly and unassailable, but one further proposition 
in which must be noted : 

" An arbitrary limitation of currency would merely inflict 
intolerable inconvenience upon the public.'* 

NOTE. — This is true only if the term " currency " means 
" medium of exchange.*' It is false if " currency " 
is intended to mean " legal tender.'' 

Increasing media of exchange enable more ex- 
changes to he ejected. 

Increasing inferior-quality legal-tender, in fur- 
ther depreciating the standard of value, enables 
FEWER exchanges to be effected, although the nom- 
inal amount of the total of the prices paid for the 
same quantity of commodities and services becomes 
actually higher. 

The darkest hour is before the dawn ! It is still com- 
paratively easy for the £ sterUng — made sound legal ten- 
der — to become the medium of exchange of more inter- 
national trade than ever before, dominating even the almighty 
Dollar ! 

But it cannot be done upon principles which are a 
tissue of fallacies, all of which operate against this country 
and in favour of those persons (if any) who are determined 
that it SHALL NOT BE DONE. 



TO THE SECRETARY 

TO THE TREASURY^ U.SA,, 

MR. CARTER GLASS 

BEFORE your appointment you were " sound " on bank 
note issues. That statement is made on the strength 
of utterances of yours reported in The Nero York Commercial 
and Financial Chronicle. 

Since your appointment you appear to have " missed 
your way." 

You have not corrected the financial blunder made over 
Federal Reserve Notes. 

Not only so, but you are going to convert that blunder 

into a BOOMERANG WHICH, AFTER HITTING 

HALF THE WORLD, INCLUDING GREAT 

BRITAIN, WILL RECOIL ON YOUR OWN 

COUNTRY, BRINGING BACK WITH IT THE 

REPROACHES OF EUROPE UNDESERVEDLY 

UPON THE AMERICAN PEOPLE. 

The stupendous banking obhgations outstanding in the 

United States (despite your gold holdings) are straining even 

the vast resources of the Federal Reserve Banking System I 

NEARLY $3,000,000,000 in Legal Tender Federal 

Reserve Notes are in active circulation. 

The issue of Federal Reserve Notes as Legal Tender in 
discounting " legitimate paper, with bankers' acceptances or 
bankers' endorsements " was based on the principle that : 

" As the Government Banks from time to time 
buy this paper, the volume of their circulating notes, 

17 B 



18 "BROADSHEETS" ON NATIONAL FINANCE 

which they issue in payment, increases, while on the 
other hand, when they collect this paper at its maturity 
and thus reduce their holdings of discounts, their out- 
standing circulation decreases." — Quoted from pamphlet 
isstied by the National Monetary Commission Document , 
No. 402, entitled ''THE DISCOUNT SYSTEM IN 
EUROPE, by PAUL M. WARBURG^ 
But it is now clear to you that Legal Tender Notes do 
not decrease in circulation in accordance with this 
specious statement. 

Yet the Federal Reserve Note Circulation MUST BE 
CONTRACTED! HENCE YOU ARE NOW CAUSING 
CONTRACTION OF 40 to 50 MILLIONS WEEKLY BY 
REFUSALS OF CREDIT FOR BILLS ON EUROPE. 
THIS AFFECTS ADVERSELY THOSE OF YOUR 
PEOPLE WHO MUST SELL IN ORDER TO COM- 
PLETE DEALS CARRIED OUT WITH BORROWED 
MONEY. BEFORE THEY DO THIS THEY CANNOT 
EVEN GET CLEANLY OUT OF BUSINESS. 

The Dollar itself is greatly depreciated through Federal 
Reserve Note inflation. It is base coin compared with the 
pre-war dollar. Its purchasing power, as evidenced in high 
prices of commodities and services, is so much below that of 
the pre-war dollar that wage-earners throughout the United 
States are seething with unrest ! 

Your strictures on credit enable Exchange Dealers to 
" peg " the British Exchange down to 3 dollars 20 cents 
(depreciated dollars) as the equivalent of £ sterling. 

$3.20 buys next to nothing in your country, yet that is 
what you want to send to this country for £. As we could 
not, even if we would, accept this, YOU ARE IN EFFECT 
APPLYING A FINANCIAL BLOCKADE IN RESPECT 
OF FOOD and RAW MATERIALS, ALTHOUGH UPON 
THOSE RAW MATERIALS MANY OF OUR MANU- 
FACTURES AND EXPORTS DEPEND I 



"BROADSHEETS" ON NATIONAL FINANCE 19 

Your bankers ** will accept bills and give credit, only 
subject to the receipt of payment from this (London) side." 

THIS IMPLIES TILVT FINANCIAL BLOCKADES 
FACILITATE PAYMENT 1 1 1 

It proves how grievously mistaken you are. — It is not 
this side of the pond which keeps your credit expansion up. — 
It is your own side. 

In stopping your Exports you will find this out. Exports 
are vital to your financial system in its present conditions. 
The Credit Inflation is occasioned by a fallacy and is main- 
tained because YOUR OWN PEOPLE CANNOT PAY. 

THE FOLLOWING IS THE FALLACY UNDERLY- 
ING YOUR FEDERAL RESERVE NOTE SYSTEM, A 
FALLACY NOT OBSERVED BY PAUL M. WARBURG :— 
TRADER No. 1 sells value A. to Trader No. 2 and 

draws a bill on Trader No. 2 which a bank endorses 

and which he discounts for federal reserve notes. 

TRADER No. 2 adds B value to parcel A and 

sells the lot to Trader No. 8, drawing on No. 8 and 

discounting, as in the previous case. 

TRADER No. 8 adds C value to B plus A value 

and sells out to a Consumer who pays in federal reserve 

notes. 

Out of these notes No. 8 meets the Bill drawn on 

him by No. 2 ) the Bank releases the Bill, and takes 

the notes out of circulation. 

The notes which thus have really stood for values 

A and B go out of circulation at the same time as A and 

B go out of existence. 

NOW MARK THIS : Trader No. 2 meets the Bill drawn 
on him by No. 1, NOT with notes obtained from the sale 
of AB. 

Those notes he had already, perforce, put back into 
his business. 

He must now make sales of other goods before he can 



20 "BROADSHEETS" ON NATIONAL FINANCE 

meet on its maturity the Bill drawn on him by No. 1. These 
goods he sells for Bills which he discounts for NOTES WITH 
WHICH HE WOULD LIKE TO MEET THE MATURING 
BILL, BUT HE CANNOT SPARE THE CASH FROM 
HIS BUSINESS AND MUST HAVE THE BILL RENEWED 
AS THE ALTERNATIVE TO FAILURE ! ! 1 

That is the point at which inflation complete and com- 
pelling is injected into your Circulation ! 

You cannot CONTRACT that Circulation without 
Disaster ! 

You cannot EXPAND that Circulation without Disaster ! 

THAT IS YOUR PROBLEM ! 

By hitting Europe you will expedite — against your 
own people — a dramatic and chaotic solution of that problem ! 
—AND LEAVE YOURSELF WITHOUT TIME TO APPLY 
A SANE SOLUTION. 

Like a financial Cranmer, Recant ! Bring your Legal 
Tender Notes to parity with Gold. Request the British 
Treasury to do Ukewise. Do it by forcing the Cheque 
System and discouraging the use of Legal Tender, cancelling 
the surplus out of revenue or loans. Then compel Exchange 
Dealers to " peg " the Exchange Rate at par, making a scale 
of different charges for special services in transferring credits, 
the smallest charges to be made for discounts connected 
with the export of raw materials on which those countries 
which owe America money base their exports. 

To find compensation for producers who would suffer 
by the fall in prices, reconsider the true functions and nature 
of Credit. 



TO LORD INVERFORTH 

AS one of the public addressed by you through The Pall 
Mall Gazette on Monday, Feb. 9, I take leave to 
comment upon some of your observations. 

You prove that we have incurred '* a large debt to 
foreign countries, principally the United States," through 
not having paid for Imports by Exports. 

You ignore the gold we sent and our sale of outstanding 
debts to ourselves in the form of foreign securities, which 
liquidated so much of the debt. 

You ignore the fact that so much of the debt is incapable 
of injuring us at the present time because it is in a state 
of suspended animation in the form of long and short- 
term securities accepted from us by United States Inves- 
tors. 

And you parade this debt as the " REASON WE ARE 
PAYING TO THE UNITED STATES, OVER AND ABOVE 
ANY INCREASE IN PRICE DUE TO THE GENERAL 
RISE IN PRICES. 5s. MORE FOR EVERY £l's WORTH 
OF COTTON, OR WHEAT, OR OTHER COMMODITY." 

This is the strangest logic of all I Because G.B. owes 
U.S. a debt which he has made special arrangements about, 
any further transactions between the two parties shall 
assume that the money of G.B. is bad as compared with that 
of U.S. I 

That conclusion is wholly unwarranted. 

21 



22 "BROADSHEETS" ON NATIONAL FINANCE 

THE FACT THAT WE ARE IN DEBT TO THE 
UNITED STATES IS NO REASON WHY CLAIMS TO 
POUNDS STERLING SHOULD BE RATED UNDER 
PAR WHENEVER THE POUND STERLING WHICH 
IS ENFORCEABLE BY LAW (i.e.; legal tender) IS 
REALLY AT PAR. 

The remedy for those high prices which are due to an 
adverse exchange is the prompt restoration of legal tender 
to parity with gold. If this is not done, then, quite apart 
from the debt we owe for what we have had in the past, 
the next £100,000,000 worth of commodities which we buy 
from the States is going to represent one-third of that amount 
in pre-war commodity value. (The bujdng power of the 
dollar in U.S. is 42 cents !) 

If, on the other hand, it IS done, then, despite the debt we 
owe for what we have had in the past, the next £100,000,000 
worth of commodities which we buy from the States will 
represent more than that in pre-war commodity value to 
the extent that the pound sterling will go to a premium in 
terms of a really depreciated dollar, less the increase in 
prices due to legitimate supply and demand, as apart from 
the increase due to tampering with legal tender. 

Bitter consequences await neglect of this principle for 
the sake of Exchange Profits. 

If America to-day wishes to pile up sterling credits 
here, it can do so at 3 dollars 30 to the £l. 

Our EXPORTERS of coal and raw materials which 
this country NEEDS can convert the credits they so acquire 
in the States into sterling at the same rate. 

Their profits from this source make them opposed to 
the restoration of our Legal Tender and the Exchanges. 

BUT THEY ARE SELLING THE COUNTRY'S 
BIRTHRIGHT FOR A MESS OF POTTAGE. 

THEY ARE BRINGING THE COUNTRY'S MANU- 
FACTURING INDUSTRIES TO A STANDSTILL! 



"BROADSHEETS" ON NATIONAL FINANCE 28 

THE PLEA THAT THEY ARE RESTORING THE 
BALANCE OF TRADE AND PARITY OF EXCHANGE 
IS LIKE A MOCKERY OF THE DYING ! 



TO THE MASTER OF THE MINT 

IF you were not a Government Contractor you would 
now have to go out of business. For (1) you cannot 
buy your raw materials cheaply enough to turn your goods 
out at a profit ; and (2) the business of coining token money 
cannot be conducted without profit (i.e., seigniorage) seeing 
that you must be prepared to meet such coins with their 
full face value in (sound) legal tender. 

As you are a Government Contractor, however, you 
are permitted to reduce the quantity of materials which 
you have hitherto used and to call the resulting goods or 
coins, so devalued, by exactly the same name. 

In other words, the silver is going out of our token money, 
just as, less hterally, the housewife finds the bread, butter, 
eggs, sugar, and cheese going out of it ; as the furnisher 
finds the carpet, oilcloth, and utensils going out of it ; 
and as the business man finds the real business going out 
of it. 

Statesmen tell you that, as a matter of fact, all these 
commodities have gone " up " ; but YOU know that our 
money has gone "DOWN." You use very Uttle gold (if 
any) because you lose so much on every sovereign that 
you mint now. And now you are to reduce the silver in 
the silver coins. 

You know, in fact, that In our ALLEGED money, 
the price of MONEY has so risen that such money has 

24 



"BROADSHEETS" ON NATIONAL FINANCE 25 

become too expensive to make without a process equivalent 
to debasement, or abrasion, or clipping. 

The consequence will be that all prices will slowly but 
surely continue to rise reciprocally with this ** fall " of 
Legal Tender, in so far as token money is legal tender. 
The reduced silver in the coins will have to be reduced again, 
for the same reason as the present one, if our present mone- 
tary policy is continued. 

Like previous Masters of the Mint, such as Sir Isaac 
Newton, you know the whole story of Currency Depreciation. 

The expansion period is a monetary paradise. 

The money, though it costs little or nothing to mint 
or print, seems to the people as good as gold. It pays the 
soldier, builds motor transjjort, renews railways, Ufts the 
mortgage off the farm I It would even build the houses 
wanted by the Wigan Corporation I It serves all — or nearly 
all — the purposes of the people who have it. It is such 
easy money. Nobody is afraid to buy anything with it 
because he is sure of being able to sell whatever he buys 
at a profit. In the boom the cry is raised by apparently 
intelligent people : " High prices mean prosperity ; the 
higher the better I " As they rise, the women (Uke the 
Southern women of the American Civil War) go to market 
with basketfuls of money ; few notice that the goods which 
they bring back would fit into a purse I Who remembers 
that in sane-currency days the money might fit into the 
purse but the goods required several baskets ? Still the 
prices rise, while purchases grow smaller. Vital goods 
become unobtainable. Wages rise until they are out of 
sight ; for industry after industry stops ; as your silver 
industry eventually must. 

Then say the Powers that be, PRICES MUST COME 
DOWN AT ANY COST I 

But it is found that hardly a business concern left in 
the country could keep going with lower prices. 



26 "BROADSHEETS" ON NATIONAL FINANCE 

Expenses, Uke cost of labour, overwhelming taxation, 
high local rates, etc., cannot be reduced ! 

Contract the currency ever so slowly and the people 
miss THE WONDERFUL MONEY. Scarcer and scarcer 
it becomes. Everybody in trade fears to buy lest he should 
be unable to sell and thus unable to get his money back, 
to say nothing of a profit. 

Goods in stock at high prices cannot be parted with at 
low prices, eager though the trader may be to get the money. 
Wage-earners grow angry over the equation between high 
rates of pay and no work on the one hand and no work 
and low rates of pay on the other. 

North, South, East, and W^est, every one somewhere 
is forced on to the horns of some particular dilemma ! 

Only once has the problem been solved without tragedy 
upon tragedy ! 

The United States was saved from the Greenback Crisis 
by abundant harvests which a starving Europe was able 
to pay for out of an abundance of gold and manufactures. 

That is not our position to-day 1 

What the gold did was to restore soundness to the Legal 
Tender 1 

(The gold had this effect on the Greenbacks, irrespec- 
tive of its effect as a commodity on the balance of 
trade.) 

What WE must do is to restore soundness to OUR Legal 
Tender 1 

Thanks to our Cheque System, we can do this at once I 
The contraction to gold values can be coimterpoised by 
the investment of productive properties with the privilege 
of credit-right, interest free and otherwise free, except for 
certain small charges and the creation by the recipients 
of a Treasury Reserve equal to one-twentieth of the total. 

The credit would create abundance, in excess of its 
redemption requirements, because it would be assigned 



** BROADSHEETS " ON NATIONAL HNANCE 27 

wholly to productive purposes or it would discharge obliga- 
tions which would be driven to productive purposes. 

The principle of economic equilibrium could be applied 
to prevent over-production or over-competition in any 
particular industry. 

The Industrial Armies menacing the State would have 
no " case," or support from rank and file, in the enormous 
com[)etition for wage-earners which production, on this 
great and varied scale, would estabhsh. 

The £ sterling would be the currency of the world 1 

The British Empire has never been so stable and pros> 
perous as it would be when (under productive credit-right) 
it had grown into a vast Imperial Credit Union. 



TO THE SEWING COTTON COMMITTEE 

I HOLD no brief for Messrs. Coats'. Far from it. 
But I am much interested in our Legal Tender Policy 
and its (now intensive) cultivation of chaos in our trade 
and manufactures. 

Therefore, I desire to call your attention to two points : 

(1) IN 1913 £8 175. 9d. would buy an oz. of gold or a 

correspondingly substantial quantity of any other 
commodity. 

IN 1919 £8 17*. Qd. will buy 57 per cent, less than 
an oz. of gold, or a correspondingly LESS substantial 
quantity of any commodity other than gold. 
This means that the purchasing effectiveness of 1919 
money is 57 per cent, below that of 1913 money, 
APART FROM EFFECTS ON PRICES PRODUCED 
BY PURELY-COMMODITY SUPPLY AND DE- 
MAND I 

It means also that it is highly fallacious to call 
£8 17*. 9d. of 1913 THE SAME THING AS £8 
175. 9d. of 1919 and THEN to reason that prices are 
jumping upwards SOLELY through relations of GOODS 
AND PROFITS, and not in any serious degree through 
CAPERS OF THE MONEY IN WHICH THE 
PRICES ARE QUOTED. 

(2) The net profits of Messrs. Coats' are given as follows : — 

£2,778,998 in 1918 
£8,694,011 in 1919. 

28 



"BROADSHEETS" ON NATIONAL FINANCE 29 

But as the purchasing effectiveness of the money 
of 1919 is 57 per cent, below that of the money of 1918, 
the net profits of 1919 by comparison with those of 
1918 can only be TRULY sUted as 
£1,588,424, or £1,185,574 LESS than those of 1918, 
when there were no complaints. 
WARNING 1 The more obstinate that we become in our 
disregard of basic realities, the more dire will be the 
maturing consequences. 



M 



TO FINANCIAL CRITICS 

A Leader Writer says : — 

R. ROBERT BENSON, who possesses the unusual 
advantage of combining practical business experi- 
ence with a thorough knowledge of the principles of econo- 
mics, dealt exhaustively with the subject, and his conclusion 
is that expansion of currency is an effect of high prices 
unless forced into circulation, as it has been in Germany 
and Russia, when it becomes a cause." 

With all respect for anybody who has a thorough 
knowledge of the very elusive principles of economics, I 
submit that any currency which is legal tender for the 
payment of any amount, and which it is therefore an offence 
against the law to decline to accept in pajnnent, is a forced 
currency, being forced by the Government into circulation, 
that therefore the evil effects of a forced circulation are 
in operation, and that the professors who assert that our 
currency is as much forced as it is in Germany and Russia, 
that it is only a question of degree, are quite right. 



80 



THE CARDINAL ERROR OF 
SOCIALISM 

TO MR. ERNEST BEVIN 

YOU are reported by the Press to have said : — *' Mr. 
Lloyd George charges us with a desire to overthrow 
the capitalist system. For once in his hfe he is right." 

You would destroy the Capitalist System. Yet is 
destruction a sound policy? 

Destruction on the appalling scale of thd world-wide 
war has done but little good service to the nations generally. 

Beyond an exceptionally well-favoured few who have 
demonstrated that gigantic fortunes may be swiftly made, 
the condition of the people in any of the warring nations 
seems to be rather worse than better than it was before 
Destruction on the grand scale obtained its wondrous 
opportunity. 

These gigantic fortunes which have excited so much 
envy represent very few pounds per head of the population, 
and they are pounds which are incapable of distribution 
because they subsist not positively, but negatively, as 
evidences of debt. 

For the wage-earner, you claim quite properly home 
comforts, leisure, enlightenment, entertainment, and an 
adequate nest egg for old age — a higher standard of living 
during working years, which can be maintained, without 
work, in the evening of a sufficiently well-spent life. 

31 



82 "BROADSHEETS" ON NATIONAL FINANCE 

Yet individuals who have attained that standard are 
anathema to you, and the system by which it has been 
attained you would destroy. 

Your logic is hopelessly at fault. 

What you really want is that every individual wage- 
earner shall have the opportunity to attain to a high standard 
of hving. That being so one would imagine that you would 
endeavour not to destroy but to eoctend the system which 
has proved itself capable of giving to individuals that con- 
dition of Ufe. 

Instead, however, you would destroy that system and 
substitute one of socialism, or communism, or common 
ownership, which does not even aim to promote the object 
which you have in view. 

SociaHsm is diametrically opposed to that Nation-wide 
Individuahsm which you really want. 

Your efforts to make the poor rich by making the rich 
poor would end in making every one poor. That is what 
communism has always done. 

But nation-wide individualism can make all individuals 
richer. How ? Thus : — 

In effect, the Capitalist System until now has been a 
closed System. 

Open it 1 

It contains a pearl of great price — the instrument of 
nation-wide individuahsm. 

That instrument is Credit guaranteed by the Nation 
through the Treasury. Manufactured credit normally is 
written up in Books against Promises to Pay guaranteed 
by Paper Securities. National Credit may be written up 
in Books against Promises to Pay secured by Productive 
Properties and guaranteed by the Government. This is 
made possible by the CapitaUst System. 

Thus, instead of transfers of the credit of individuals 
being made to the Government on loan at no interest (as 



"BROADSHEETS" ON NATIONAL FINANCE 88 

Lord Buckmaster has proposed) the Govcniment would 
localize transfers of national credit on loan to individuals 
at no interest. 

But the Credit would have to be used solely for the 
creation of its equivalent in new productive capital, in 
order to multiply production, cause competition for wage- 
earners, make labour so relatively scarce that its value 
would eventually make all human units function fittingly 
as intelligent directors of highly productive machines instead 
of being direct hewers of wood, drawers of water, beasts of 
burden, matter without mind. 

The necessity of preserving economic equilibrium 
between particular kinds of production and consumption, 
combined with the right of every producer to claim credit 
for further production, would create many new forms of 
production. 

The invested capital which would be displaced in the 
operation would require new forms of investment for income. 

This would furnish ample funds for cheap borrowing 
and social r3forms. 

Investment capital would be made dynamic. None 
would remain static and parasitical. 

The vast debit against industry, which evils of the 
closed capitalist system have in course of time created, 
would thus be hquidated by the virtues of the open system 
as exemplified by productive credit — credit as productive 
as that which the war created was destructive, credit which 
would finaUy produce contentment and prosperity for all. 

Through extension of the Cheque System for economiz- 
ing the use of legal tender money, gold value would be 
restored, as the basis of the credit scheme. 

Gold values would lower the proportion of high prices 
which reduces suppUes. 

Increased suppUes, included in more production, would 
lower that portion of high prices which is due to scarcity. 

o 



84 "BROADSHEETS" ON NATIONAL FINANCE 

Producers who would otherwise suffer through the fall 
in prices would be saved by the privilege of the new and 
cheap credit. 

The COST OF LIVING would be REDUCED, whilst 
the COMPETITION FOR THE SERVICES of the WAGE- 
EARNER would be increased. 

The scheme would apply to any country according to 
its capacity for adopting our cheque system on an extended 
scale, or any substitute therefor except the issue of legal 
tender notes. 

This country would be safeguarded against future 
financial embarrassment by the payment for the guarantee 
of the nation which would be made for his share of credit, 
by the producer, in a fee of one-twentieth part of the amount. 

These fees would accumulate in a Treasury Reserve. 

This would be permanent while the credit itself would 
be temporary ; in constant process of redemption by instal- 
ments fitted to the conditions of each case. 

Before the Act could itself operate the moral effect of 
its appearance on the Statute Book would immediately 
improve the general economic situation. 



''THE ECONOMIC CONSEQUENCES 
OF THE PEACE'' 

BE as kind to yourselves as you are asked to be to the 
Germans I 

Asked by whom ? By John Maynard Keynes, C.B., 
in his book entitled The Economic Consequences of the 
Peace. This book is so fine a piece of special pleading 
that its author is now the economic notabihty of the day. 
But in proving what the Germans cannot pay it impUes 
inevitably what the British cannot pay I 

It proves not only that Germany could not pay 
£8,000,000,000 under the indemnity clauses of the Peace 
Treaty, but that even were the sum reduced to £2,000,000,000, 
and £500,000,000 of this sum set off against the surrender 
of property under the treaty, Germany could not even then 
pay the balance of £1,500,000,000, imless it were not to 
carry interest pending its repayment, and were payable in 
thirty annual instalments of £50,000,000, beginning in 1928. 

This statement is quite true, as events will prove. But 
why cannot Germany pay under the terms of the Peace 
Treaty ? Because her mode of payment involves the accu- 
mulation of the bulk of both interest and princip€d at com- 
pound interest ; and at 5 per cent, compound interest a 
capital sum doubles itself in fifteen years. 

As Mr. Keynes rightly judges : ** It is as certain as 
anything can be that Germany cannot pay anything 
approaching this siun " — in that time. 

35 



86 "BROADSHEETS" ON NATIONAL FINANCE 

Geemany's Difficulty 

Nevertheless, there is nothing in his book to prove 
that Germany could not pay the whole of the indemnity of 
£8,000,000,000, without interest, by 160 payments of 
£50,000,000 per annum, instead of only £1,500,000,000 by 
thirty such payments. 

It cannot be contended seriously that Germany cannot 
pay 105. per annum per head of her population (the 10s. 
decreasing inversely with any increase in the number of 
heads). 

The point is that Germany cannot pay unless she is 
relieved of the stupendous effects of compound interest. 
But what about the enormous obUgations of the working 
section of yourselves (the British people) to the investing 
section ? 

Are not those obUgations accumulating at compound 
interest just the same ? 

The nation as a whole has undertaken to pay them to 
the investing section. It is, therefore, in honour bound to 
pay 1 But can it possibly pay without a striking modifica- 
tion of the financial system underlying industry ? Its war 
debt of victory is £8,000,000,000. 

But who is asking that only £50,000,000 per annum for 
160 years shall be paid ? 

Who is pointing out that even that would be a greater 
hardship on one section of the British population of 46,000,000 
than upon the whole of the German population of nearly 
twice that number ? Are not you, the British people, being 
told that if you consume less, spend less, and produce more, 
you will be able to redeem this debt of £8,000,000,000 — a 
greater debt than Germany's war debt, plus an indemnity 
of £2,000,000,000 ? 

When the war debt and privately invested capital, 
which drew interest and redemption, were hmited to pre-war 
dimensions, one-third of the population was constantly on 



"BROADSHEETS" ON NATIONAL FINANCE 87 

the verge of starvation ! To-day the war debt is eleven 
times greater in amount and private investment funds are 
vastly increased, whilst the working section of the com- 
munity, which must grind out the return upon them, is 
actually smaller. 

Man and Machine Power 

The development of machine power per man makes 
production capacity greater only in such occupations as lend 
themselves to machine power. The total production capa- 
city falls far short of the colossal requirements, and a desper- 
ate conflict between the investing and working sections of 
the community is being rendered inevitable by the folly 
which expects that those requirements can possibly be met 
without help on equally colossal lines for the productive 
working section of the nation 1 

Now, just as it is being asked that Germany shall give 
promises to pay which shall bear no interest, but be redeemed 
by thirty or more equal annual instalments of the capital 
# sum which these promises to pay are to represent, I have, 
during the past five years, been asking that promises to 
pay, which shall bear no interest, shall be permitted to 
British producers, and be redeemed by them by a specific 
number of annual instalments totalling the capital sum 
which these promises to pay are to represent. 

They are to be based on a credit-right vested in pro- 
ductive properties to half the gold value of such property, 
and created as bank credits against that right. They are 
to be used solely for productive purposes, so that production 
may be multiplied in every conceivable way, short of destroy- 
ing economic equihbrium, which an advisory council would 
be formed to conserve. 

Thus would the nation as a body, in permitting its 
producing section to create easy credit, counterpoise the 
debit which the nation as a body owes to its investing section, 



88 "BROADSHEETS" ON NATIONAL FINANCE 

and enable that colossal debit to be met honourably and 
prosperously without confiscation or levies, predatory taxa- 
tion, or a clash of physical forces. 



BUDGETING FOR DISASTER 

IT has been said that if the rent of every landlord, the 
profits of every employer, the interest paid to every 
capitalist, and the money value of all the paid labour engaged 
In production, which represent the total wealth produced 
in the United Kingdom in a year, were added together, 
the sum would not exceed £2,000,000,000. 

Yet of this production the Chancellor of the Exchequer, 
in our curious scheme of National finance, proposes to take 
£1,418,000,000 (for whoever may pay, the ultimate source 
is production), and to distribute it mainly amongst unpro- 
ductive workers in this country and abroad, in Mesopotamia, 
Egypt and elsewhere, using, contingently, a comparative 
trifle in redemption of National Debt. 

The difference between £1,418,000,000 and £2,000,000,000 
is £582,000,000 which is approximately the sum out of 
which the entire producing conmiunity and their dependants 
must defray their cost of living for the year. 

But as £l per week for, say, 80,000,000 persons, for a 
year, amounts to £1,560,000,000, the effort cannot succeed. 

If one person could Uve on £l per week, which at the 
present price of conmiodities and services is barely possible, 
nearly £1,000,000,000 would have to be made up from 
accumulated savings. "Twenty such Budgets" would 
therefore mean that, in order to live, to redeem a debt of 
roughly £8,000,000,000, accumulated savings, which unfor- 

39 



40 "BROADSHEETS'* ON NATIONAL FINANCE 

tunately do not exist, to the sum of £20,000,000,000, would 
have to be consumed. This is Budgeting per impossible ; 
and yet it is to be tried. 

The earmarked excuses are idle ones. Instance the 
loss on the Post Office Services as the reason for making 
the course of production harder. 

Would it not be wiser to sell these services to private 
enterprise for a good round sum supported by guarantees 
of efficiency ? This would reduce the annual requirements 
of the Budget by at least £50,000,000, and also provide a 
handsome sum, by way of purchase price, for both the 
monopolies and the Government property involved. This 
price, accepted in the form of Government securities, would 
either save interest, instead of incurring a loss, or, if cancelled, 
would redeem debt. There are other national assets, and 
municipal ones too, which ought to be dealt with in a similar 
manner. 

If the new Budget is necessary, the reaUzation of all 
available assets is necessary also ! 

But is such a Budget necessary ? And is it possible 
that to eat up unproductively the productiveness and the 
accumulated wealth of the country, year by year, can " Leave 
to our successors an ample revenue, and to our country a 
national credit second to none " ? 

What is the matter with national credit now if we but 
use it to produce those instruments of production, productive 
property of the greatest practicable variety, on which 
national credit, both for cultivation and redemption, must 
ever depend ? 

On the use of credit, Mr. Chamberlain, out of his own 
mouth, condemns his own Budget, in the words : — 

" But a new creation of purchasing power based solely 
on Government credit, uncovered by any increased produc- 
tion of wealth, can only lead, if unchecked, to ultimate 
disaster." 



"BROADSHEETS" ON NATIONAL HNANCE 41 

But it is on Government credit that the new creation 
of Government purchasing power in this Budget is based 
by nioans of values inflated by reference to a depreciated 
standard created by the Government itself; and this credit 
is not only uncovered by any increased production of wealth, 
but is to be used with no pretensions to production and 
with those destructive effects which lead, " if unchecked, 
to ultimate disaster." 

NATIONAL CREDIT IS SOMETHING WHICH MAY 
BE USED PRODUCTIVELY BY INDIVIDUALS IF NOT 
BY GOVERNMENTS. 

The shceme of credit-right put forward early in the 
war period by myself requires that credit so obtained shall 
both be covered by existing productive capital and be 
employed to the uttermost farthing either in the creation 
of further productive capital or in the relief of charges upon 
existing instruments of production. 

No valid objections have ever been raised to the prin- 
ciples involved. In the early stages of the war I was informed 
by a City man that I had put my finger on the right spot ; 
that the idea was known to be sound ; and that the attempt 
would be made to kill it by SILENCE. 

I said then, as I say now : ** Force of circumstances 
will compel its adoption as the alternative to social up- 
heaval." Such circumstances cast their shadows in such 
Budgets as that of Primrose Day ! This Budget shows 
how necessary are the gradual refunding operations which, 
as good faith permitted, would be rendered possible, 
imder a scheme of credit-right, by the release of investment 
funds now burdening existing productive properties. The 
rate of interest at which these operations could be carried 
out would prove that Government credit is not rated to-day 
at 7% because of anything that is wrong with national 
credit. 8|% would attract all the funds required when 
general productive industry was not only not being stifled 



42 "BROADSHEETS" ON NATIONAL FINANCE 

by predatory taxation and threats of a levy upon capital, 
but on the contrary was endowed with a special privilege. 

Taxation of the extraordinary nature of that provided 
in this Budget is wholly unjustifiable on economic grounds. 
It is economic folly to expect that the vast obligations of 
the nation can be met either by its present limited produc- 
tive capacity or by the appropriation of funds by means 
of which that productive capacity might conceivably be 
extended. It is also economic folly to expect, as certain 
financial interests do, that the return from the industry 
of those who must pay to those who must be paid, involved 
in interest on the National Debt, redemption of the Debt, 
Government expenditure, and private funds, invested and 
to be invested, all with compound interest effects, is not 
now far too great to be obtainable from the industries of 
the country on orthodox Unes. 

For this situation a remedy is needed ; but confisca- 
tion is a futile and delusive expedient, not a remedy. 

The true remedy Ues in helping, not hindering, industry. 

The privilege of credit-right would furnish the neces- 
sary help on the necessary terms. It would enable produc- 
tion not only to bear all the burdens which must be budgeted 
for, but also to yield the income which investors seek. 

Confiscation, whether by taxation or by levy, is not a 
remedy, but an iniquity ! 

When an outstanding credit is confiscated for the pur- 
pose of canceUing a debit, it is a theft not only of principal 
but of compound interest throughout all time I 

No State ever survived the application of this pernicious 
principle. No statesman ever apphed it without a grave 
breach of trust. 

In a Christian country the general conscience rests 
upon the Ten Commandments. Individuals without such 
a conscience often succeed, but systems of government 
never I 



"BROADSHEETS "ON NATIONAL FINANCE 48 

Of debt, Mr. Chamberlain takes too narrow a view. He 
believes that if we owe a debt to ourselves instead of to 
America, " The burden of external debt will become a valu- 
able national asset." 

Fallacious use is made of the word ** National." It 
is made to denote the whole nation, but connotes only a part. 

If our internal debt is an asset, and the debt is so 
colossal, why should it take such Budgets as this to enable 
us ** to rise to the level of our great responsibility " — the 
rebuilding of our national credit ? 

The Budget contradicts the opinion that the debt is 
a national asset. It shows it to be an asset to particular 
individuals, but a grave liability to the productive com- 
munity I Therefore the public must be considered as separ- 
ate human beings, distinct from figures on a balance sheet, 
in our national finance. 

We should credit where we must debitj as, quite properly, 
we debit where we must also credit. The fundamental 
principles of Credit permit tliis policy in the interests of 
production and national salvation. 



A TAX ON TURNOVER 
SUGGESTED MODIFICATION 
SIR OSWALD STOLL'S INTERESTING PROPOSAL 

WE have received the following communication from 
Sir Oswald StoU :— 

" My view of Mr. Chamberlain's opinion of a tax on 
turnover is that it is not only accurate but is also a strong 
condemnation of his own excess-profits duty and corpora- 
tion tax. His objection to a tax on turnover is that it falls 
again and again between the original commencement of 
production and the time when goods produced reach the 
consumer. This signifies that it either raises the price 
at which goods can be produced or stops their production. 
Now that, in my opinion, is exactly the effect of such taxes 
as the excess-profits duty and the corporation tax. 

" In applying any of these pernicious taxes the Chan- 
cellor is either raising prices inordinately or decreasing 
supplies. When the further raising of prices, by having 
legal tender of a depreciated standard money as the measure 
of prices, is taken into account, it is not too much to say 
that the policy of enhancing prices and stopping supplies 
is being pursued with an utter disregard for national econo- 
mics ; that is, economics applied for the benefit of the 
nation as individuals, not for the benefit in the nation's name 
of a few international masters of organized finance in order 
to make the bulk of this nation and of other nations their 
civil, military, naval, industrial and domestic servants, 

44 



"BROADSHEETS" ON NATIONAL HNANCE 45 

victims of one-sided considerations and supposed national 
(?) progress. Taxation which will neither inflate prices nor 
stop supplies is good ; and, as Mr. Chamberlain himself 
implies, taxation which will raise already high prices or stop 
supplies is bad. 

'* A tax upon turnover, however, is a suggestion which 
should make for a form of taxation saner than those forms 
which leave the taxpayer with the burden of high unofficial 
taxation, in the shape of unduly high prices, as well as the 
high official taxation to provide for Government expendi- 
ture inflated unduly by high prices. 

A Tax on Finished Products 

** E^ly last year I suggested a national tax to be paid 
by the consumer of finished products. Many authorities 
have shown that in any form of taxation the consumer 
ultimately pays. In your special article of May 17 some 
trouble is taken to prove it. Hence, if the consumer were 
required to pay a consumption tax on every finished product 
consumed, food included, he would merely pay directly what 
he must otherwise pay indirectly ; whilst through this tax 
being imposed in the place of taxes like excess-profits, cor- 
poration tax and super-tax, which increase the cost of the 
production of what he consumes, he would find himself 
much better off. 

" Thus, costs of production would be lower by the 
avoidance of the cumulative effect of increases at every 
stage of production. Costs of production being lower, 
what the consumer purchased for consiunption would be 
actually cheaper, and, therefore, could be sold to him cheaper. 
Such products being cheaper there would be a greater demand 
for them. The greater demand, in face of lower costs of pro- 
duction, would cause an increase in supplies, and increased 
supplies would tend to the further lowering of prices. 
Increased production induced by lower costs and greater 



46 "BROADSHEETS" ON NATIONAL FINANCE 

demand would decrease unemployment and find work in 
places where housing wastage is now going on, through 
houses being available where there is no work to be had 
and work obtainable where there are no houses to be had. 
" The entertainments tax is not so much a tax on turn- 
over as a tax upon the finished product, such as I suggest. 
It is clear that if the entertainments tax had to be provided 
on the production of the entertainment, whether that pro- 
duct were sold or not, it would promptly put an end to the 
production of entertainments. The cost of such enter- 
tainments would be so increased and the market for them 
when produced would be so uncertain that very few man- 
agers could afford to take the monetary risk involved in 
their production. But the entertainments tax does not 
increase the cost of production, and is only imposed on 
the consumer of the product. So a tax on all finished pro- 
ducts would admit of production at the lowest possible 
cost and be payable only in respect of the products sold as 
well as payable only by the consumer. All persons being 
consumers the tax would be a truly national one. 

Expected Yield 

" Of course, the amount of a yield of 2d. in the 1*. tax 
on sales of all finished products would vary with the pur- 
chasing power of the pubUc generally. With the public 
prosperous it could yield nearly £400,000,000 per annum, 
estimating the consumption capacity of the nation at £l 
per week per person of the total population. 

*' The Government could avoid the coming crisis (the 
most terrible in history) and make the people even more 
prosperous than such a yield requires, if it would apply the 
now necessary heroic measures which (1) would rectify our 
legal tender money and (2) vest credit-right in productive 
properties, for the creation of further productive machinery 
or the relief of existing charges against production. This 



"BROADSHEETS" ON NATIONAL FINANCE 47 

creation of productive credit the law of credit compensa- 
tion, after the war creation of destructive credit, absolutely 
and urgently demands. It would make the whole com- 
munity prosperous. 

" The entertainments tax was a dangerous impost to 
place upon a restive people. The bulk of the people were 
so prosperous, however, that they paid it willingly. Those 
who could not aiford to pay it caused many inferior houses 
of entertainment to close down, and, being driven from 
the pictures, these displaced members of the public did not 
help to minimize unrest. Still, if the people are prosperous, 
they are willing to pay a tax of this nature. That fact 
the entertainments tax has proved. 

Sbiall Cost or Collection 

" A tax upon finished products is, therefore, a clear 
way out of his difficulties for any Chancellor who prefers 
the general prosperity of the people to the mere domination 
of the people by organised international finance. The 
cost of collection by stamps on purchases, by audited ac- 
counts, and other means applied in the collection of the 
entertainments tax would be small in comparison with the 
yield. But such a tax under the credit conditions which 
it is in the power of the Government to create would save 
the State." 

[Sir Oswald Stoll's suggestion is worthy of careful 
consideration. We would point out, however, that from 
the consumers' standpoint it would matter little whether 
there was a small tax on the various processes of produc- 
tion and distribution, as we advocated in our issue of the 
17th inst., or a comparatively heavy tax on the finished 
product. Sir Oswald Stoll suggests an impost of 2d. in the 
shilling. That is a very high charge, especially upon small 
purchases. We would further point out that, in our article 



48 "BROADSHEETS" ON NATIONAL FINANCE 

of the 17th irst., we expressly exempted from the proposed 
tax business transactions, such as theatre tickets, transfers 
of property and shares, akeady liable to comparatively 
heavy special taxation. — Editor, Financier.] 



WHAT MUST WE DO TO BE 
SAVED? 

JOSEPH'S coat of many colours was a model of sartorial 
propriety compared with the coat now being worn by 
the British Public, as represented by Parliament. 

One patch of the garment, Nationalization, does not 
quite harmonize with another patch. Existing Bureaucracy, 
and is in violent conflict with Private Enterprise, which 
again, alongside Communism, is a chromatic outrage, as 
great as the patch called Individualism ; the latter, curiously 
enough, being represented by a single patch, instead of by 
many. 

As required by the philosophy of clothes, this motley 
coat colours the thoughts and actions of all the members 
of the body which wears it. 

This may be exemplified by passing from figures of 
speech to figures of men. 

Next to Mr. Lloyd George, the biggest figure in Parlia- 
ment is probably Mr. Bonar Law. His big mind has in con- 
sequence become imperfectly kaleidoscopic. His thoughts, 
placed together, show different colours, which will not 
blend. Yet the fate of the country is largely in his hands. 
He believes in Individualism. Has he not said : 
** The whole prosperity and growth not of this nation 
alone, but of all the nations that have arisen, has 
been based on individual initiative and individual 

49 D 



50 "BROADSHEETS" ON NATIONAL FINANCE 

effort — (hear, hear) — and if anyone believes that you 
can get the same results by any system of officials they 
know nothing of history and they know nothing of 
human nature — (hear, hear) " ? (Albert Hall, Friday, 
May 7th, 1920.) 
That is admirable, as his hearers also thought. 

He believes that Individualism is the vital instrument 
of national prosperity and growth. 

YET IN THE SAME SPEECH HE DEFENDS THE 
NEW BUDGET! 
The colossal levy of the Budget can be made " only 
by getting it from Industry." 

" They (the (Jovernment) must make a big hole in 
this debt." 

" The people to make the hole were those who were 
making money." 

That is, the people who are keeping the country 
going must be deprived of their resources because the 
others have no resources which the Government can 
deprive them of. 

Previously in the speech he had expressed himself 
as " not sanguine enough to believe that this period 
of prosperity would not sooner or later be followed by 
dull times." No wonder 1 

This remark is a grim joke ; worthy of Thomas Hood's 
" Ben Battle was a soldier bold. 
And used to war's alarms, 
But a cannon-ball shot off his legs. 
So he laid down his arms." 
When one is shooting off the legs of Industry, it is safe to 
predict that Industry will collapse. 

There is glaring inconsistency between this Budget and 
Individualism. 

Why were the vast sums of the Budget required ? 
Because " they could not reduce expenditure in that way 



"BROADSHEETS" ON NATIONAL FINANCE 51 

(dispensing with new and bringing back old departments).** 
But would not Government expenditure and debt be 
vastly reduced if every function now performed by the 
Government and capable of being performed by private 
enterprise were handed over to private enterprise, there to 
bear its quota of the lesser taxation which the Government 
would require, instead of helping to swell taxation to which 
it makes no contribution ? 

Activities transferred from '* under Government ** to 
private enterprise would prosper and grow under that 
*' individual initiative and individual effort," of which the 
same results cannot be got (in Mr. Law's own words) " by 
any system of officials." 

Surely, to refrain from making such transfers, and to 
prefer such a Budget, is to prevent full scope for in- 
dividuality and ability ? 

Is it credible then that in this speech Mr. Bonar Law 
is reported to have said : 

" Any attempt to prevent full scope for individu- 
ality and ability would be ruinous to any nation which 
cfUempted it** ? 
That assertion is absolutely true ; yet the attempt is being 
made with the approval of Mr. Bonar Law himself, without 
whose support it could not be done. 
But that is not all. 

Not only does the Government refuse to transfer ex- 
pensive public services to private enterprise, which would 
reduce ex|)enditure and promote the valuable, vitalizing 
quality of Individualism, but by means of an iniquitous 
Budget it is establishing a permanent limitation to the 
** scope for individuality and ability." 

This Budget will in fact make a " comer *' in Indivi- 
dualism. It will prevent absolutely the Individualism 
which might become Nation-wide, because it will place in 
a position of difficulty and embarrassment every individual 



52 "BROADSHEETS" ON NATIONAL FINANCE 

not in a position to command credit for the conduct and 
development of his business. 

It will hand over to a few Controllers of credit on a 
gigantic scale the power to impoverish hitherto successful 
men who by absorption of their business concerns at forced- 
sale prices will be reduced to subsidiaries and dependents. 

The somewhat bigger type, the live man with a fortune 
made through the disorganisation of war, is a menace to 
the growing control by great financial interests of the busi- 
ness operations of the entire worid. Though this miUionaire 
is small fry compared with controllers of thousands of mil- 
lions, his existence sets back the plans of orderly progress 
towards too-ambitious control in every country. 

But this Budget will " scotch " him in Great Britain, 
and put him where he is wanted ; whilst the mightier Croesus 
sits back smiUng behind world-wide projects and a choice 
cigar. 

So are the lesser rich to be mocked by the greater, 
while " Labour " (think of it !) applauds. 

Finally, instead of contracting credit by indefensible 
taxation, and penalisation of successful industry, credit 
should be expanded for the express purpose of creating more 
productive capital, i.e., instruments of production, upon 
which the financial credit of the nation must rest ; for as 
Mr. Bonar Law, however wrongly he applies it, very truly 
says : " The financial credit of this nation is the rock upon 
which improvement of any kind must be founded." 
The Budget is the crux of the question. 
Are our Statesmen to become cats' paws in financial 
strategy ? 



THE COMING CRISIS 

WHO can deny that we are on the verge of a great 
financial and economic crisis ? 

Hundreds of enterprises are held up by costs too high 
to admit of sane capitalization 1 

Thousands of enterprises necessary to keep the economic 
wheel revolving are on the brink of failure because they 
cannot buy cheaply enough or sell dearly enough ! 

Buyers want lower prices. Sellers want higher prices. 

All of us who are both buyers and sellers are in a 
quandary. 

Bankruptcy threatens ** commercial men in many 
spheres '* if prices fall ; yet the call for a fall is wide and 
deep. 

Do we intend to walk open-eyed into the jaws of the 
most terrible economic upheaval the nation has ever known ? 
Occupying our minds en route with futile ideas of Capital 
and War Levies which, if practicable, would strike the 
country with sudden and complete industrial paralysis. 

Financiers' Finance, with its checkmates by rival 
groups, is ruining the country. 

A number of Financiers no more make Finance than 
a number of worldlings make a world t 

National Finance has never had a chance. 

Our Treasury's idea of it, in relation to the country in 
general and the taxpayer in particular, is to Give Too Little 
and to Take Too Much. 

59 



54 "BROADSHEETS" ON NATIONAL FINANCE 

The aim of National Finance should be some prosperity 
for all Nationals, not all prosperity for some Internationals. 

Our new Budget will impoverish the National Rich, 
remove them from the path of the International Rich whose 
worid-plans their wealth menaces ; create emigration on 
a great scale, through unemployment, for the furtherance 
of those plans ; and leave the country to pass through the 
valley of the shadow for generations to come. 

The Chancellor should cancel both the Excess Profits 
Duty and the Corporations Tax and also reduce both the 
Super- Tax and the Death Duties. 

He should be a shield for our defence rather than a 
sword to wound us. 

The shield exists could he but see it in a true conception 
of National Finance and National Credit. 

Because we are in debt Credit is being restricted. 

This is financial madness from the National standpoint. 

Credit may redeem Debt as Diamond cuts Diamond. 

Credit must exist for the good of the people, that the 
people may exist for the good of Credit. 

Where there is Credit there is business. 

Contract Credit and you contract business. 

When Credit is expanded so is business. 

Credit however is never to be desired for the sake of 
Credit, but for the sake of the use to which it may be put. 

In War : for Production, having for its end Destruction. 

In Peace : for Production also, but having for its end 
Construction. 

World shortages of essentials created by the war are 
being intensified and perpetuated by misconception and 
misdirection of the true uses and principles of Credit. Demand 
has ceased to be Effective I 

In the relations of Interest to Credit High Interest 
for Destruction and Low Interest for Construction are alone 
soimd. 



"BROADSHEETS" ON NATIONAL HNANCE 65 

In National Credit God made both the principle and 
the principal and Man made the interest. 

Capital and Labour alike, Be warned in time ! 

For Production on the great scale a nation must provide 
Abundant Credit at Negligible Interest Charges and reduce 
Taxation of the Producer. 

Production on the great scale will save us ; will make 
the basis of the Internal National Debt sound. To do that 
is more important than to repay the Debt. 

Repayment may take place with advantage by easy 
stages. 

Out of Production on the great scale we can make 
abundance of goods, remunerate labour with not only high 
but real wages, establish credits abroad with which to cancel 
floating and fixed foreign debt, bear taxation adequate for 
Imperial Defence (the only justifiable government business 
enterprise), and become a contented people. 

Sound money, Credit-right and Private Enterprise 
(made capable of nation-wide application) are the way to 
general prosperity. 

Unsound money. Limited and costly Credit and already 
too much Public Enterprise, with the promise of more, are 
the way to chaos and desperation. 

This is a law of Human Nature : 

" Invidious Restraint, under Knowledge far more than 
under Ignorance, excites the wildness, barbarism, and 
fierceness of men's minds." 

The day for Credit-Right and its Corollaries instead of 
Credit Restraint has arrived I 

This is the chance for National Finance 1 



THE CHANCELLOR'S RED LIGHT/ 

WORDS that fall officially from the Chancellor of the 
Exchequer of the day are fateful. How startling 
therefore are these : 

" Capital must be conserved for public and for 
business needs ; speculation must be discouraged and a 
better response must be given than has hitherto been 
made to the new Treasury issues and the Treasury Bills, 
but particularly to the new Treasury issues. The Bank 
reserve is lower and the currency note issue is higher 
than any of us would wish to see. To-morrow's returns 
will show Ways and Means advances largely increased 
in consequence of the payment of the June dividend. 

"That is all right, if it is a purely temporary 
phenomenon. The whole question is, will it be temporary ? 
If it is more than temporary, it is a danger. There is no 
room for speculation ; there is no room for rashness. 
Money is dear. Is it going to be dearer ? The remedy 
is in the hands of the possessors of money. If they will 
conserve it, if they will follow a cautious policy, if they 
will not inflate credit or over-lend for trade, if they will 
encourage investors and themselves to meet the public 
need, then we may avert the peril, and I hope we shall." 
Will those words bear examination ? 
" Capital must be conserved for pubUc and business 
needs." 

What is meant by " Capital " ? Is it Instruments of 

56 



* BROADSHEETS " ON NATIONAL FINANCE 57 

Pioduction, or Invested Funds, or Funds awaiting Investment, 
or Funds accumulating for Investment ? 

How can Instruments of Production be conserved for 
public and business needs if prices are so high, materials so 
scarce, the strain of taxation so tense that ordinary repairs 
and renewals for maintenance cannot be carried out? 

How can they be conserved if costs of production are 
so heavy that works are being closed down to rust and 
rot? 

How can Invested Funds be conserved for public and 
business needs if public and business charges against them 
are frittering them away in falling market values ? 

How can Funds awaiting Investment be conserved for 
business needs if the capitalization of new enterprises is 
rendered so inordinately high by the rate of public and business 
charges that the figures required to yield the necessary return 
are, in the first place, too fantastic for realization, and in 
the next place, should they be realizable, are threatened 
with confiscatory taxation ? 

How can Funds awaiting investment be conserved for 
public needs when all such Funds previously invested prove 
that funds so employed have not only not been conserved, 
but have involved heavy capital losses ? 

How can Funds accumulating for Investment be con- 
served for public and business needs if they cannot accmnu- 
late in view of the fact that an amount of profit of to-day 
of less purchasing power than a pre-war profit of half its 
amount is regarded as including an excess profit of which the 
Government may confiscate 60 per cent. ? 

If none of these meanings can be attached to the word 
Capital the expression used by the Chancellor is meaningless. 

" Speculation must be discouraged." 

How much of the business done since the Armistice, 
outside the laudable attempts to restore instruments of 
production appropriate to peace, has been anything btU 



58 "BROADSHEETS" ON NATIONAL FINANCE 

speculation for profits from the ever-rising prices which 
are reciprocal to an ever-falling money standard ? 

" The Bank reserve is lower and the currency note issue 
is higher than any of us would wish to see." 

Is not this the direct result of the financial policy of 
the Treasury, which controls the currency note issue, and 
gambles upon currency notes being real money when they 
are even less real money than the Bank Reserve is a real 
Reserve ? 

" To-morrow's return will show Ways and Means 
advances largely increased in consequence of the payment 
of the June dividend. That is all right if it is a purely tem- 
porary phenomenon. The whole question is, Will it be 
temporary ? If it is more than temporary it is a danger." 

Who but the Treasury as the responsible Paymaster 
of the country can draw upon Ways and Means ? 

Is not " The June Dividend " merely incidental to a 
general financial policy, of which there will necessarily be 
other incidents ? Is not the danger really the fact that 
increasing expenditure is outstripping decreasing income, 
because the national tax-spending capacity is exceeding 
the national tax-paying capacity owing to a financial policy 
based (1) on an unsound monetary standard which increases 
the cost of government and everything else and which, when 
the price peak is reached, brings business down with a run ; 
and (2) on expensive methods of palpable State Socialism 
founded on principles of Nationalization which the Govern- 
ment publicly condemns ? 

" There is no room for speculation ; there is no room for 
rashness." 

But the elusive money standard policy of the Treasury 
is an actual, and is by far the most effectual, cause of both 
speculation and rashness. 

" Money is dear. Is it going to be dearer ? The remedy 
is in the hands of the possessors of money." 



"BROADSHEETS" ON NATIONAL HNANCE 59 

The possessors of money 1 Why, of what is nowadays 
called money, the chief possessor is the Government itself I 
The purchasing power of credit is Money to-day, and the 
Government possesses the purchasing power of the general 
Credit of the people 1 The remissness of the Treasury lies 
in the fact that it does not recognize this position and posses- 
sion, although it evidences a misconception of the idea by 
printing an excess of paper money. 

Never before did a Chancellor in set terms acknowledge 
absolute control of the Government and the country by 
the financial community. At a time and in a country 
when and where it is well known to every one that, without 
its monetary element, trade is paralysed, the Chancellor 
says : *' Money is dear. Is it going to be dearer ? The 
remedy is in the hands of the possessors of money." 

It is known that the financial community alone has the 
power under present financial regulations to transfer credits ; 
and they, it is admitted, have thus the power to make 
money cheap or dear, i.e., to make or break the power to 
trade. 

If that is true, ought not the regulations to be changed ? 
It is true, but true to an extent not great enough to remedy 
the evils of the present situation. That is, the financial 
community has the power to make trade bad enough for 
the forlorn hope of a way out through wreckage, but not 
to make it good enough for a sure way out through prosperity. 

Yet what is more pertinently true is that the Govern- 
ment has the power to widen adequately the scope of the 
system of transferring credits for productive purposes; 
and that the Treasury as the financial instrument and mouth- 
piece of the Government is condemning itself by its failure 
to take action when it says " The remedy is in the hands 
of the possessors of money." 

But this amazing thing follows : 

** If they will conserve it, if they will follow a cautious 



60 "BROADSHEETS" ON NATIONAL FINANCE 

policy ; if they will not inflate credit or over-lend for trade, 
if they will encourage investors and themselves to meet 
the public need, then we may avert the peril, and I hope 
we shall." 

Even though the encouragement of business is forgotten 
within a single paragraph, one might imagine that the public 
need included not only the balancing of the Budget and the 
reduction of pubUc debt, but also means to meet the heavy 
cost of living, in addition to the charges for accommodation 
which the financial community are able to make for providing 
the means whereby the economic activities essential to 
liquidating these obligations may be carried on. 

One might imagine, too, that the peril lay in handing 
over to these possessors of so-called money, the body and 
soul of the bulk of the nation, to be subjected to the calling 
in of loans, the inquisition, regulation and limitation of their 
trade, and the diversion of funds from trade to Government 
securities, without recourse except to Carey Street from 
these arbiters of public fate ! Yet this peril the Chancellor 
actually invites 1 

The detached, impersonal way in which the Chancellor 
is ready to bind the nation hand and foot to be disposed 
of by a comparatively few big financiers is incomprehensible. 

Only a statesman of the most callous type (which no 
one would accuse Mr. Chamberlain of being) could be con- 
sciously guilty of so grave a breach of the trust reposed in 
him by the People. 

Perhaps the signalman unduly controlled by circum- 
stance is showing a red light in the hope that the nation may 
see and understand for itself and act accordingly. 



TRAGIC FINANCE/ 

IS THE BANK RATE 7% OR 24%? 

IF a yard were reduced to the equivalent of 9 inches whilst 
still being called a yard, and if, nevertheless, the price 
of a yard remained the same, that price, although nominally 
the same, would actually be four times greater. 

In essence the Bank Rate is the price of money, and 
becomes deceptive when the money standard has been 
depreciated. 

Whatever the cause of our so-called 7 per cent. Bank 
Rate ; whether it is to induce foreign financiers to retain 
here funds payable in gold (on foreign-held Treasury and 
other Sterling Bills) which cannot be so met ; or to divert 
funds from trading channels because the *' float '* required 
in Treasury finance is now so colossal that Trade must be 
sacrificed ; or that those who control the '* corner " in finan- 
cial machinery, and are able to delude the Treasury, may use 
the Bank Rate as a means of squeezing out holders of securities, 
properties and businesses required for rounding up big 
national and international projects to be equally controlled ; 
and also incidentally to bring recalcitrant labour to heel ; 
whatever it may be, that cause should be pubHcly defined. 

If the nation generally be regarded as the public, secrecy 
is " not in the public interest." 

The Bank Rate cannot do any of these things without 
accomplishing also more or less of each of the others ; nor 
can it attract gold to this country as a high Bank Rate is 

61 



62 "BROADSHEETS" ON NATIONAL FINANCE 

supposed to do when gold fetches no more than would buy 
the same number of dollars as the gold itself would buy in 
the States, where gold is at a carefully adjusted premium. 

Under a sound monetary standard a 7 per cent. Bank 
Rate means no more than 8 per cent, interest to the Trader ; 
though even that is a serious burden where much trading is 
based on borrowing. 

Now, however, we have a depreciated monetary standard 
under which the same Bank Rate almost means Suppression 
of Trade. 

This standard, a fluctuating one, is gold at £5 Ss. Od. 
per ounce instead of £3 175. 9d., showing our Legal Tender 
to be depreciated by 32 per cent. 

To the borrowing trader, manufacturer, etc., the cus- 
tomary 1 per cent, above Bank Rate charged for loans 
makes his interest 8 per cent. 

But, in the gross trading efficiency of what he borrows, 
this really means 8 per cent, for £100 less £32 ; i.e., £8 interest 
for £68, which is not 8 per cent., but nearly 12 per cent. 

If the further depreciation of our legal tender in pur- 
chasing power due to prices raised by scarcity or shortage 
of commodities and increased cost of living be taken into 
account, the net trading efficiency of £100 is reduced to £34, 
upon which £8 is nearly 24 per cent. 

Next, consider the Trader who is an importer of goods 
from a country where monetary exchange is against us, say 
the United States. His so-called £100 will represent only 
897 present dollars instead of 486 pre-war dollars ; and as 
the present dollar is worth only 42 cents, compared with 
the 100 cents of the pre-war dollar, his 397 dollars equal in 
trading efficiency only 16,674 cents against 48,600 cents, or 
roughly one-third I 

Hence 8 per cent, on the nominal amount which this 
British Trader borrows is 24 per cent, on the true amount I 

Such considerations either did or did not affect the 



** BROADSHEETS " ON NATIONAL FINANCE 68 

decision which fixed the Bank Rate, every 1 per cent, of 
which meant at least 8 per cent, to this Trader. 

In either event, the following inferences may be drawn : 

(1) The present Bank Rate should not be maintained 
unless a compensatory expedient is immediately adopted, 
an expedient in the form of a credit-right scheme which 
will infuse Uquidity into fixed assets, render static funds 
dynamic, in transfers from one security to another, without 
injury to the original borrower ; and either minimize any 
legitimate need for so high a Bank Rate or neutraUze its 
evil effects. 

(2) The new Finance Bill should not be forced upon 
the country unless endorsed by a Committee of Commercial 
and Industrial Safety, which should be appointed forthwith, 
with plenary powers to investigate the general principles 
and special operations of our Financial Policy of the War; 
in resj>ect of which Committee, Financiers, Financier-Mer- 
chants, Bankers and Treasury Officials should be excluded 
from Membership. 



STOP THE WAR BETWEEN FINANCE 
AND INDUSTRY 

IT MENACES THE STATE! 

FINANCE is the invisible power, as Commerce and 
Industry are the visible power, in the means whereby 
the Nation lives its economic life. 

There is a silent war ever being waged between them. 

The Financial Community periodically manoeuvres to 
make Credit, which is its chief instrument, scarce and dear 
to the Commercial and Industrial Community. At different 
times and places for various reasons Financial Policy to 
this end becomes mere Financial Conspiracy. 

The Commercial and Industrial Community requires 
Credit to be abundant and cheap. 

When Credit is made scarce and dear prices tend to 
fall, but the means to buy fall lower, business failures mul- 
tiply, industry stagnates, and unemployment spreads. 

It is at such times that the Financial Community uses 
its invisible credit power to acquire control of the fundamental 
instruments of commerce and industry at forced-sale prices 
and to that extent causes these contending Communities to 
overlap. 

The cash reserve principle in Banking by its effect on 
expansion and contraction of Credit, causing corresponding 
waves of prosperity and depression in trade, has thus been 
so useful in directing both financial and industrial power 

64 



"BROADSHEETS" ON NATIONAL FINANCE 65 

into the hands of Financiers that the wish that this move- 
ment is a natural law is father to that thought in the most 
patriotic and least international financial minds. 

Nevertheless, the law is artificial, and those who under- 
stand this enjoy the power to control the " output of the 
genial sun or kindly rain " of trade. 

This quoted phrase was used by our gifted Lord Chan- 
cellor on Sunday, with another application, however. 

This power makes the harvest a good one and wheat 
plentiful to Finance, but it nevertheless makes bread dear 
to Commerce and Industry. 

A further point for the Lord Chancellor to note is that 
the " Deliberate restriction of output by the worker, known 
as ca' canny," however foolish it may be, is a natural con- 
sequence (delayed until made possible by powerful Unions) 
of the deliberate restriction of credit by the financial community 
as supported by the financial policy of the country. 

Credit is now being abnormally restricted against 
general Commerce and Industry (as distinct from the sp>ecial 
Commerce and Industry which the Financiers themselves 
promote) by the following methods : 

(1) An abnormally High Bank Rate for Paper Money 

of abnormally low purchasing power. 

(2) Deliberate contraction of Credit by the Banks in 

concerted action. 
(8) Confiscation by Taxation of the Credits accumulated 

in keeping industry going. 
These Causes will force " ca' canny " upon Commerce 
and Industry even more completely than Trade Unions 
can force it upon Labour. 

Far-sighted Finance, through not being far-sighted 
enough, will find that it has over-reached itself when, as 
the alternative to something worse, its own section of Com- 
merce and Industry alone must support the whole wage- 
earning conmiunity working upon " ca' canny " principles 

a 



66 "BROADSHEETS" ON NATIONAL FINANCE 

and Union rates of pay ; at a time moreover when the yield 
from Industry required for service of debt, costs of govern- 
ment and return upon investments is ten times greater than 
ever before. 

It seems futile to remind all concerned that these con- 
ditions are mutually destructive and that therefore under 
such a policy, the " something worse " must happen. 
Referring to Clause No. 1 : 

High Bank Rate never fulfils its legitimate function 
when Legal Tender falls short of the long-established- 
mint-par-of-gold standard. That is not only a fact, 
but it is one of the few facts in finance which ought to 
be a fact. 
Referring to Clause No. 2 : 

Deliberate contraction of Credit by the Banks in 
concerted action is usurpation of the most powerful 
influence in the government of the country by a small 
section of the community operating against the remain- 
der of the population ; it is equivalent to the aboUtion 
of representative government in favoiu" of unauthorized 
autocracy. What wonder that Trade Unions arrogate 
to themselves autocratic powers I 
Referring to Clause No. 3 : 

Confiscation by taxation of the Credits accumulated 
in keeping industry going, operating in conjunction 
with Clauses Nos. 1 and 2, is dehberate support of the 
fatal policy of an international financial community 
which cares little for this country except as an area 
to which certain departments of reorganized world- 
industry are to be allotted. 

On the heads of those responsible for these caitses 
will lie the War of Industrial Independence which must 
inevitably result. 

The remedy with which to avert the catastrophe is 
not wanted because the Financial Community are too bhnd 



"BROADSHEETS" ON NATIONAL FINANCE 67 

to see that it is necessary^ not merely for others, but also 
for themselves. 

Tliat remedy is : (1) The restoration of sound Legal 
Tender by rapid methods, and 

(2) The vesting of Credit-Right in Instruments of Pro- 
duction for the promotion exclusively of further production 
limited alone by the necessity for a very real commercial 
and industrial equilibrium as distinct from a hypothetical 
financial equilibrium. 



''THE GERMAN GREAT BANKS AND 

THEIR concentration:' 

AS WE ARE ACCEPTING BOTH AT HOME AND 
ABROAD THE UNDILUTED POLICY OF THE 
INTERNATIONAL FINANCIERS IT IS UTTERLY 
INCONSISTENT TO REPUDIATE HUGO STINNES ! 

(1) Because HUGO STINNES IS MERELY A NOMINEE 

OF INTERNATIONAL FINANCE ; 

(2) BECAUSE HE IS DOING THE WORK WHICH IS 

REQUIRED OF HIM. 

HIS sardonic exultation is born of almost assured success 
of the policy he stands for. The " almost " measures 
its folly ! 

The following facts speak for themselves. They are 
extracted from a translation pubhshed by the United States 
Government, in 1911, of 

"THE GERMAN GREAT BANKS AND THEIR CON- 
CENTRATION" in connexion with "THE ECONOMIC 
DEVELOPMENT OF GERMANY," By Dr. J. RIESSER, 
of the University of Berlin, a book which proves that the 
power behind Hugo Stinnes controls the entire economic 
situation of (Jermany, and world-capital estimated in terms 
of money at £30,000,000,000 ! 

" Hugo Stinnes had some relations with the Dresdner 
Bank, having participated with it in the reorganization 
of the Saar-und Moselle Mining Company. He established 

68 



"BROADSHEETS" ON NATIONAL HNANCE 69 

relations also with the A. Schaaffhausen'scher Bankvemn, 
after the latter had founded a community of interest with 
the Mittelrheinische Bank in Koblenz, of which Stinnes 
was a board member. In 1901 Stinnes established relations 
also with the Darmstadter Bank, when he became vice- 
president of the board of the Deutsch-Luxemburgische 
Berserks und Hutten-Aktien-Gesellschaft, which owes its 
financial strength and high technical standing to the Darm- 
stadter Bank. The concern combined both mining and 
smelting operations after the acquisition in 1904 of the 
Stinnes mines, Friedlicher Nachbar. 

" On January 1st, 1905, a community of interest was 
entered into between the Gelsenkirchener Bergwerks- 
Aktiengesellschaft, the Aachener Huttenverein Rote Erde, 
and the Thyssen concern Schalker Gruben und Huttenverein. 
By this step a group of competing banks, viz. : the Dis- 
conto-Gesellschaft, the Deutsche Bank, the Dresdner Bank, 
and the A. Schaaffhausen'scher Bankverein, were brought 
together in a joint undertaking. This event served also 
to enhance the power of Hugo Stinnes and August Thyssen, 
who became members of the ' joint committee ' of this 
community of interests. 

" This combination seems to have brought about some 
sort of equilibrium in the Rhenish-Westphalian industrial 
territory, and simplified certain complex relationships in 
the banking and industrial field. On the other hand, there 
are already evident the beginnings of new conflicts in 
another field. 

"As we saw, the Lorraine-Luxemburg iron industry 
has in recent times been coming to the front more and more, 
and is beginning to overshadow even the Rhenish-West- 
phalian industry. One reason of this development is the 
far lower cost at which it can produce pig iron as compared 
with the Rhenish-Westphalian district. Another reason 
is that, owing to the electrical process recently introduced 



70 "BROADSHEETS" ON NATIONAL FINANCE 

in the manufacture of steel, the value of Luxemburg-Lorraine 
ores, which formerly were hard to work, because they were 
rich in phosphorus, has been greatly enhanced. These can 
be utilized most cheaply and advantageously by the works 
located close to the ore beds. The quantity of such ore is 
estimated at about 2,000,000,000 tons. 

" Realizing that a serious movement of the German 
pig iron industry toward the south-west has set in, the lead- 
ing captains of industry and the leading banks alike have 
felt obliged to increase their influence in the Lorraine- 
Luxemburg region. 

" In this territory the position of the firm, Spaeter & 
Co. in Koblenz, is very powerful. It is the founder of the 
Rombacher Huttenwerke, which have brought up the Mosel- 
huttenwerke and dominate the blast furnaces in Rodingen, 
RumeUngen, and the Eisenhuttenaktienverein Dudelingen. 
In this district Thyssen has thus far gained a foothold prac- 
tically only through his interest in the Huttenverein Sambre 
at Moselle, while Stinnes's hold in this territory is only 
through his membership in the Supervisory board of what 
is now a very important company^ — the Deutsch-Luxem- 
burgische Bergwerks und Hutten-Aktiengesellschaft and 
his rather unimportant connexion with Spaeter & Co. As 
recently as April, 1909, a step was taken which is certain 
to affect deeply the relations of the different industrial 
groups and their relative positions. In all likelihood it 
will also exert a powerful influence on the relations of the 
different bank groups which are dependent on these industrial 
groupings, and on the general movement toward concentra- 
tion. An enormous increase was made in the capitalization 
of the Gelsenkirchener Bergwerks Gesellschaft. Its capital 
stock was increased by 26,000,000 marks to a nominal 
amount of 156,000,000 marks, and its bonded debt by 
20,000,000 marks to 70,000,000 marks. The latter increase 
was made in spite of the fact that there was still available 



"BROADSHEETS" ON NATIONAL FINANCE 71 

an unissued amount of 9,825,000 marks in 4 per cent, 
bonds authoriied in 1906. 

" This move attracted attention not only by the size of the 
capital increase but also because it teas jnade at a time of money 
iiringency and unfavourable market conditions. The company 
justified this step on the ground that the additional resources 
were indispensable for the erection of new blast furnaces 
and steel works in Esch and in Deutsch-Oth. It was also 
given out officially that the measure was necessary to ensure 
an ' adequate position ' for the company in case the Steel 
Works* Union, which terminates June 80th, 1912, were 
not renewed. Doubtless this had reference to an increase 
of its quota in the syndicate. The Gelsenkirchener Berg- 
werksgesellschaft had originally been a producer of coal 
and coke only. After it had entered into a community 
of interest with the Rote Erde and the Schalke Works it 
became also a producer of pig iron, steel, semi-manufactures 
of iron and steel, beams and rails, but it nevertheless con- 
tinued to hold the largest production quota in the coal 
syndicate. Through its action of April, 1909, however, 
it entirely shifted its centre of gravity away from the pro- 
duction of coal to that of iron and steel. 

" This step was in keeping with the movement of the iron 
industry to the south-west. The new resources were to be 
expended for the purpose of operating its steel and rolling 
mills in combination with its blast furnaces, where conditions 
made possible the cheapest cost of production, i.e., in the 
heart of the Lorraine-Luxemburg Minette district, where 
it owned extensive ore beds. 

" Through this action, however, the Gelsenkirchener 
Bergwerksgesellschaft became a direct competitor of August 
Thyssen, who had been a member of its board. He at once 
accepted the logical consequence of the situation and resigned 
from the board. Earlier he had withdrawn also from the 
board of the Phoenix. The Thyssen concern Deutscher 



72 "BROADSHEETS" ON NATIONAL FINANCE 

K^aiser owns very important ore rights in the Lorraine- 
Luxemburg district, and he himself, as was shown above, 
is interested in the Saar-und Moselbergwerksgesellschaft 
in K^arhngen. Moreover, early in 1909 he invested several 
million marks in land in this section and acquired the patent 
rights to produce electro-steel in all his works. 

" In the near future, the struggle for supremacy is hkely 
to be fought out in the Lorraine-Luxemburg district. The 
trial of strength between the leading interests will come as 
soon as negotiations begin with a view to renewing the 
Steel Works' Union at the expiration of the present agree- 
ment. 

" The progress of the conflict and its outcome, and 
the industrial concentration that is likely to precede or 
follow it, will undoubtedly be influenced by the banks and 
groups of banks that stand back of the captains of industry 
and their enterprises. 

"So far as we can foresee, the important part will 
be taken by those banks which now possess, or by that 
time will have attained, a controlling influence over the 
industrial concerns which dominate the Lorraine-Luxem- 
burg district. It will be of the utmost interest to watch 
further developments. These will reveal many different 
combinations and changes in industrial and banking con- 
centration and new group ahgnments in both fields." 

HUGO STINNES AND AUGUST THYSSEN : 

" While Stinnes is closely aUied with Thyssen " (as 
is evident from pages 741/2 of the same publication) " and 
owns jointly with him the Mulheimer and the Sambre et 
Moselle mining companies, he owns also in his own right 
the coal mines Mathias Stinnes, Victoria Mathias, Graf 
Beust, Carolus Magnus, Friedrich, and Ernestine. He owned 
also the FriedUcher Nachbarmine (transferred in 1904 
to the Deutsch-Luxemburgische Bergwerks-und-Huttenak- 



"BROADSHEETS" ON NATIONAL FINANCE 78 

tiengesellschaft). In the southern part of the Ruhr district 
he is almost in sole control ; in the rest of this territory 
he shares control with Thyssen. Stinnes likewise joined 
the Supervisory board of the Gelsenkirchener Bergwerks- 
gesellschaft. In addition he is on the board of the Nord- 
stem and of the Mittelrheinische Bank in Koblenz and 
Duisburg. The latter is closely related to Spaeter & Co. 
in Koblenz. 

" The supremacy of Thyssen and Stinnes in the Ruhr 
district is disputed in the main only by the Haniel family 
and by Karl Funke of Essen." 

THE BANKS AND MINING : 

" More and more it is becoming clear, in all essentials, 
that the fate of the mining and metallurgical industries as a 
whole wiU be decided not in Upf>er Silesia or on the Saar, 
but in the two districts in which primarily the great banks 
are contending for financial control — the Rhenish-West- 
phalian and the Lorraine-Luxemburg districts. Between 
the latter and the former there are close connexions. Largely 
through the help of the banks the Lorraine-Luxemburg 
district has recently attained a position of more dominating 
importance, its extensive ownership of mines in the Ruhr 
section giving it large influence also in the Rhenish- West- 
phalian territory." 



THE RUSSIA THAT IS RISING 

FROM A 

PAPER MONEY DEBAcLE 

BEFORE Lenin, Legal Tender Currency in Russia became 
so depreciated that prices quoted in it rose to dizzy 
heights ; so high that buyers could not buy, and sellers 
could not sell. Industry collapsed. Business ceased. 

Millions of men, women and children became destitute ; 
boots, clothes and food became priceless. 

The nation was threatened with nakedness and starva- 
tion ; individuals sank in the streets exhausted, and died 
where they feU. 

That opened the way for a Dictator to save a people 
distraught. 

Along that pathway Lenin came ! 

He called for volunteers to save Russia. 

He bought with money from his printing press food 
and equipment for his soldiers. 

He discredited other moneys. His money alone he 
made Legal Tender ; whereby he made it comparatively 
scarce and valuable. 

He paid his soldiers with this new money, and fed 
and clothed them. 

The Naked and the Hungry flocked to his Army. 

The rest of the people found it profitable, safe and 
patriotic to work unceasingly on army service and supphes. 

And NOW ? 

74 



♦* BROADSHEETS " ON NATIONAL FINANCE 75 

100,000,000 PEOPLE ARE BEING WROUGHT INTO 
A FIGHTING MACHINE I 

100,000,000 PEOPLE ARE BEING ORGANIZED: 
NOT FOR INDUSTRY— NOT FOR COMMERCE— NOT 
FOR PEACE— NOT FOR ANY OF THESE THINGS— 
BUT FOR FIGHTING ALONE ! 

Necessity compels it 1 

The same kind of economic necessity, likewise caused 
by an inversion of sound monetary principles, drove the 
Great Napoleon, who was capable of so much high-minded- 
ness and generosity, to " brave alike the sun of Egypt and 
the snows of Russia ; boimd by no treaties ; regardless 
alike of private honour and pubhc faith ; prodigal at once 
of the blood of his people and the property of his enemies ; 
indifferent equally to the execrations of other nations and 
the exhaustion of his own." 

THEREFORE, ALSO, LENIN, COULD HE STOP 
FIGHTING, DARE NOT 1 

No industries in Russia can now be maintained EXCEPT 
TO SUPPORT AN ARMY ; and the Army must be VAST 
ENOUGH TO REQUIRE THE SERVICES OF THE 
WHOLE ADULT CIVILIAN POPULATION I 

That Army may become mighty enough to terrorize 
all Europe, Asia, and Northern Africa. It must ever be 
on active service — capturing, controUing, destroying ! It 
can rest only where and while its new money, after super- 
seding repudiated moneys, remains effective 1 Its end can 
come only by miUtary exhaustion, with PERHAPS a govern- 
ment forced upon Russia by the rest of the world. 

BUT THE FEW TROOPS THAT NAPOLEON 
BUONAPARTE COULD MUSTER NEARLY SUBJU- 
GATED EUROPE 1 

Those troops were fighters in the Russian sense of 
to-day. They fought to live, and could not hve if they 
did not fight. 



76 "BROADSHEETS" ON NATIONAL FINANCE 

WHAT, THEN, MAY NOT RUSSIA DO? 

Before it collapses it may wreck the Eastern Hemi- 
sphere I Not Bolshevism, but this necessity will be its 
motive force in spreading the false Lenin Doctrines 1 

Peace for France in Napoleon's Day meant Industrial 
Paralysis and Starvation. 

PEACE FOR RUSSIA IN LENIN'S DAY MEANS 
THE SAME! WHY? BECAUSE THE TRADING 
PROPOSALS OF A HANDFUL OF FINANCIERS ARE 
MERE MOCKERY OF DESPERATE MILLIONS OF 
HER PEOPLE— UNLESS FREEDOM IN FINANCE IS 
GRANTED ALSO. 

Russia will have to be fought in another world-war 
UNLESS BY EXAMPLE IT IS SHOWN THE BETTER 
WAY! 

THE BRITISH EMPIRE COULD, BY EXAMPLE, 
SHOW RUSSIA THIS BETTER WAY. 

If the British Government would endow British I*ro- 
ductive Properties with a right to practically free Credit, 
based on the properties to half their gold value, that Credit 
to be used wholly to create FURTHER Productive Pro- 
perties or to relieve existing Productive Properties of First 
CHARGES, they would SHOW RUSSIA HOW TO PRO- 
DUCE PEACEFULLY ABUNDANCE OF COMMODITIES 
AND CREDIT WITH SCARCITY OF UNEMPLOYMENT, 
INSTEAD OF SCARCITY OF COMMODITIES AND 
CREDIT WITH ABUNDANCE OF UNEMPLOYMENT! 

The British Empire has the power thus to endow 
productive properties as a consequence of its Cheque and 
Banking System. 

So soon as Russia saw the miracle of prosperity that 
could thus be wrought, its Army would be turned upon 
itself to teach the Russian people how to use cheques, to 
establish the necessary Banking, to utiUze such Credit, and 
to live contentedly and peacefully at home. 



"BROADSHEETS" ON NATIONAL FINANCE TT 

That Army would not then bemused far and wide, as it 
otherwise must be, treaties or no treaties, to spread Bol- 
shevism with Fire and Sword 1 

STATESMEN of all Parties and of No Party I— FINAN- 
CIERS who control existing methods of creating and dis- 
tributing Credit ! Whether it please you or not, circum- 
stances have made that simple principle of credit essential 
to the survival of modem civilization. " Be just and fear 
not." Be otherwise and tremble, not merely for the Empire 
at large, but for your own hearthstone I 



FORSAKEN BY AMERICA 

MENACED BY 200,000,000 RUSSIANS DEPENDENT 

ON GERMANY 

WARRED ON BY OUR GOVERNMENT 

HAVE WE LOST THE GREAT WAR? 
IS THE NATION BEING DRIVEN " DOWN AND OUT " ? 
IS THE BRITISH EMPIRE DOOMED? 

AMERICA — not the American People, but merely the 
mentors of their Government Executives — forsook 
us when she forced the Armistice upon us. 

Admiral Sims truthfully declared that though America 
entered the war in April, 1917, she was of little help to the 
AlUes until ten months later. 

The real help came with the thoroughgoing financial 
blockade contained in THE EXECUTIVE ORDER OF 
THE PRESIDENT, DATED JANUARY 26, 1918, which 
began to operate early in February ; which startled Ger- 
many into the desperate attacks of March " when the German 
armies were sweeping in a victorious tide over France, 
threatening at once Amiens and Paris " ; and which pro- 
duced the internal collapse of the enemy, beginning with 
Bulgaria in September, and ending with Germany in Novem- 
ber I 

That Blockade, if continued, would have enabled the 
AUies to march victoriously upon Berlin with little or no 
further loss of life, hailed as saviours of a starving people 

78 



"BROADSHEETS" ON NATIONAL FINANCE 79 

— but America substituted the Armistice 1 Succeeding 
events compel the inference that THE FINANCIAL BLOCK- 
ADE WAS APPLIED NOT TO HELP THE ALLIES 
BUT TO PREVENT SUCH A VICTORY BY GERMANY 
AS WOULD HAVE PLACED THE AMERICAN SECTION 
OF INTERNATIONAL FINANCE UNDER THE GERMAN 
SECTION. 

Thus did America forsake us 1 

200,000,000 RUSSIANS MENACE US ! 

// peace with Poland he signed by the Bolshevik Govern- 
ment this will be done in order that Russia may attack 
India, and elsewhere, with overwhelming armies. War 
and Conquest are the only Industries open to Russia. As 
the Assignats caused the failure of the French Revolution 
(although no revolution is practicable without Assignats 
or their like) and prepared the situation for a Napoleon 
who could employ the people by making war ; so the paper 
money which PROVOKED the Russian Revolution also 
DESTROYED it, and prepared the situation for a Lenin, 
who, with tens of millions of soldiers, compared with Napoleon's 
hundreds of thousands, may destroy modem civilization 
more completely than the Barbarians destroyed that of 
the Romans. 

// pecue with Poland be not signed the Russians may 
overrun Europe. 

We could show Lenin how to save Russia and himself 
without war and conquest ; but the same people that check- 
mated our Financial Blockade in 1916 by means of our own 
Treasury Bills in the hands of so-called Neutrals, and that 
stopped the American Financial Blockade too soon, again stop 
the way. Hence, if peace be not signed with Poland, we, 
instead of being in Germany directing resistance to Russia, 
or instead of having shown Russia the needlessness of her 
warlike enterprise, shall be forced to seek the aid of Germany, 
as Mr. Churchill has already done. In other words, we 



80 "BROADSHEETS" ON NATIONAL FINANCE 

have been made DEPENDENT ON GERMANY'S BECOM- 
ING ONCE AGAIN powerful, rich, resourceful, defiant ; 
not poor, disarmed, defenceless I Whilst 
UPON US EVEN OUR OWN GOVERNMENT MAKES 

WAR! 

It does so when it impoverishes the people by means 
of restricted credit, amazing taxation, high cost of money 
of small purchasing power, etc. It does so by making it 
almost a crime for a British subject to make profits. The 
Government forgets and the Smillies never knew that WAR 
UPON PROFITS IS A DESTRUCTIVE WAR UPON 
THE NATION ITSELF, BECAUSE PROFITS IN PRIN- 
CIPLE ARE NO MORE THAN WAGES, AND WAGES 
ARE THE NATION'S MEANS OF LIVELIHOOD. 

The impoverishment of the British subject will neither 
impoverish nor impede the section of International Financiers 
which checkmated our Financial Blockade and stopped 
the American Financial Blockade too soon I Rather will 
it make these men more viciously powerful, more completely 
dominant over orderly peoples and pliable governments 
than ever. THEIR international meat is OUR national 
poison. So much so that soon it may be said of the Heart 
of the British Empire, as David Lloyd George said of the 
Earth : 

" This torn and bleeding earth is calling to-day for the 
help of the America of Abraham Lincoln." 

Those are the words of our great Premier. But are they 
strictly true ? Was not the America of Abraham Lincoln 
"torn and bleeding," too? Was it not the POLICY of 
Abraham Lincoln that made it whole ? 

Is it not the POLICY — not the country nor yet the 
man — that the British Empire needs to-day ? 

We have THE MAN in DAVID LLOYD GEORGE 
HIMSELF ! But not the Policy. 

That Policy consisted of UNITY AND EMANCIPATION. 



"BROADSHEETS" ON NATIONAL FINANCE 81 

The method of applyinf;^ it was bloody but successful. 

THE UNITY OF THE BRITISH EMPIRE^REAL 
UNITY— AND THE EMANCIPATION OF BRITISH 
SLAVES may be achieved by a comparatively bloodless 
method — a method which could regenerate Russia or any 
other stricken country capable of civilized pursuits. 

It is said by a few thousands of well-placed but short- 
sighted and narrow-minded people, that the war has opened 
out wonderful prospects for the British Empire. These 
people ought no more to be listened to than the 600,000 
Leninites who, whilst they predict the wonderful prospects 
of Russia, rule and exploit without mercy 200,000,000 Russians. 
Just as the wonderful prospects of the 200,000,000 Russians 
consist of Industrial Slavery for the Civilians until military 
exhaustion overtakes the TROOPS and the 600,000 Leninites 
go down in a frenzy of savagery and revenge ; so the wonder- 
ful prospects seen for the British Empire, pre-suppose Indus- 
trial Slavery under intolerable conditions for the real wage- 
earning workers, both EMPLOYERS AND EMPLOYED. 
Those intolerable conditions are foreshadowed by the normal- 
year service of debt of £865,000,000 (amongst other charges) 
announced in a recent White Pap>er by the Chancellor of 
the Exchequer. 

These figures contemplate such a charge annually for 
about 50 years. That means £18,250,000,000. To this, 
however, must be added the effect of the reinvestment of 
at least £100,000,000 of that annual charge each year for 
producing an income of at least 5 p.c. ; these investment 
funds not being needed for consumption purposes. But as £l 
per annum invested at compound interest at the rate of 5 
p.c. produces in 50 years £209, one hundred million pounds 
per annum in 50 years would have to produce £20,900,000,000 : 
80 that in 50 years the producers of the country are expected 
to provide IN ADDITION TO CURRENT NEEDS AND 
UNDER CONDITIONS WHICH MAKE PROFITS ALMOST 

V 



82 "BROADSHEETS" ON NATIONAL FINANCE 

A CRIME the impossible total of £39,150,000,000 ; although 
they must also provide the further £700,000,000 per amium 
to be Budgeted for and the charge upon industry made by 
every £l per annum of investment funds invested during, 
say, only, the past century, for every £l of which industry 
has had to create £2,610 ; most of it, moreover, for further 
investment in INDUSTRIES, EITHER AT HOME OR 
ABROAD, UNDULY LIMITED BY THE IDEAS, PRE- 
JUDICES AND FAVOURITISMS OF REMARKABLY 
FEW MEN. 

Those who expect such impossibilities are inviting their 
own downfall even more surely than the 600,000 Bolsheviki 
are inviting theirs. 

For remedying the evil it is as great a folly on our part 
to make levies upon capital, confiscate war profits, add 
profits to the criminal code, repudiate debt and impoverish 
individuals by taxation, as it is on the part of Bolshevists 
to try to reconstruct civili25ation on foundations of robbery 
and murder. 

A simple modification of the existing Capitalist System 
in relation to redeemable credit is the true and only remedy : 

Emancipate the British slaves by granting practically- 
free Credit-right, guaranteed by the whole nation, to indi- 
vidual producers, in respect of their productive property, 
for the purposes of creating further productive properties 
and relieving existing ones of burdensome charges ; do this 
under conditions which will increase the demand for, and 
the value of, wage-earners ; who, in due course, will thus 
acquire the means to quahfy as producers for the same 
Credit-right on their own account, in circumstances which 
will remove their prejudice against machines as taking the 
place of men and women in the multiplication of productive 
power. 

The vast sums in interest which Production (enormously 
multiplied and varied) would thus be saved, would enable 



i 



"BROADSHEETS" ON NATIONAL FINANCE 18 

all its obligations to be met willingly and prosperously ; 
whilst freedom more glorious and lasting than Lincoln 
gave to the black slave would reach the pallid slaves, both 
employers and employed, in offices, factories, shops, works, 
town dwellings, and countryside. Throughout the British 
Empire the Bond of British Credit granted to every Pro- 
ducer as a legal right, the Bond of All for the benefit of 
Eiach, would weave a golden thread of Union more binding 
and permanent than bonds of steel. 

DAVID LLOYD GEORGE, 

British Prime Minister at the gravest crisis in British history 1 
The Mantle of Abraham Lincoln has fallen upon YOU ! 

By the example which it is in your power to promote, 
by the imperial and material power which the exemplars 
combined would rapidly acquire, you, and you alone of mortal 
men to-day, can save " the torn and bleeding earth." 



THE CRISIS! 

"^ LITTLE CHILD SHALL LEAD THEM'' 

'T^HE Children's Newspaper, of August 7, 1920, says : 

" A syndicate of British business men has acquired 

80 per cent, of the maritime rights of the river Danube, 

but the grown-up papers have not done more than 

make this announcement." 

Doubtless the disingenuous grown-up papers knew better 

than to say more. For itself The Children's Newspaper 

concludes that because a Scotsman and a few Associates in 

International Finance have 

" not only acquired ships and maritime rights, but 
shipbuilding yards, coal mines, piers, wharves, ware- 
houses, stations and barges, the barges alone repre- 
senting £20,000,000 " : 
that, therefore, 

"GREAT BRITAIN controls the economic life of 
Central Europe, GREAT BRITAIN has become the 
master-builder of Central Europe's ruined civiliza- 
tion, GREAT BRITAIN can assure the peace of the 
worid ! " 
But Great Britain is not yet merely a Scotsman's Syndi- 
cate ! What does this mean ? Listen ! Whilst a paper 
standard of value, a high Bank rate for depreciated money, 
amazing taxation which either confiscates or prevents 
(except for high finance) business profits, and an avowed 
banking policy of credit contraction, combine to restrict 
the resources of British Industry and foster unemployment, 

84 



\ 



"BROADSHEETS" ON NATIONAL FINANCE 85 

a favoured Scotsman is able to raise untold millions in credit 
for controlling the Danube — alive to the fact that 

** the controllers of great rivers have in their hands a 

mighty power '* ; 
aware that *' what Central Europe required was work " ; 
knowing " how to get raw materials into Central Europe ** ; 
" how to provide the manufacturers of all those ruined 
countries with capital ; how to get the populations of 
those States back to the self-respect of self-supporting labour " 
— for High Finance I 

Observe I Credit is being diverted to establish manu- 
facturing concerns elsewhere against the interests of our 
peopU, whilst manufacturers here are being forced out of 
business by restriction of credit, spending power, production 
and employment, added to high costs of materials caused 
by our adherence to legal tender of an inferior monetary 
standard ! 

It is taking the name of Great Britain in vain to say 
that Great Britain is doing this ! 

It is like saying that ten men shall have £1,000,000 
between them, or an average of £100,000 per head, when one 
man alone is given the £1,000,000 and the other nine are 
made into paup>ers. 

WTiat is the Truth ? 

The Truth of such schemes is that International Finance 
is against us as a People in the regeneration of " the torn 
and bleeding earth." 

It is a great thing to help, a human thing to profit by, 
the " wreckage of the Danube," but International Finance 
would do it by making wreckage of us. 

That International Finance is against us has produced 
our Crisis. 

It causes Germans to flout the British Premier, Official 
France to embarrass him, American Executives to chechnaU 
him 1 



86 "BROADSHEETS" ON NATIONAL FINANCE 

Why ? Because he is wise enough to temper his keen- 
ness to fight Soviet Russia— Soviet Russia struck a blow — 
a dishonest one — at International Finance in repudiating 
foreign debt : it mattered little that the power of Russia to 
pay had already been broken by the pre-Lenin Revolution. 

The International Financiers want Russia, first to 
agree to pay, next, to be able to pay, and eventually to 
pay I 

They know that Soviet Russia can never pay, so they 
are ready to sacrifice millions of lives, other than their 
own, to crush Soviet Russia 1 The French International 
Financiers, the German, the American, and — most potent 
of all politically^ — the German- American International Finan- 
ciers are all ready to crush Soviet Russia in the same way. 

The British Premier, who knows that all debts should 
be paid, who knows, too, that Soviet Russia can never pay, 
must also know that it is not necessary to sacrifice millions 
of lives to procure payment, because Soviet Russia will 
ultimately destroy itself by economic exhaustion resulting 
from monetary disease, and its Government will go down in 
an upheaval of the Russian People, who will then, if helped, 
be both willing and able to pay. 

Soviet Russia must fight for Ufe, a great, inevitable, 
but abortive fight. 

In the beginning Germany may be neutral or otherwise. 
Ultimately, Germany must be resuscitated into a great 
fighting Power that it may not be submerged. 

Soviet Russia thus, either directly or indirectly, will 
tear up the Treaty of Versailles and dig the grave of France, 
Belgium, and Holland. 

The European Continent will be dominated partly by 
Germany and partly by Russia, as the opposing forces of 
organized High Finance on the one hand and Desperate 
Economic Chaos on the other, until a collapsed Russia gives 
way to Germany alone or appeals to whom ? 



"BROADSHEETS" ON NATIONAL HNANCE 87 

WILL THE BRITISH PREMIER ELECT TaDAY 
TO STAND ALONE ?— setting free financially and thus 
uniting imperially a great Empire solidly behind him ? 

Will the British Empire at long last be permitted, 
by means of credit-right for productive purposes, to develop, 
unfettered and unrestrained by the specialized schemes of 
International Finance ? 

If Germany will not save Poland, Germany will save 
herself. She will not join Soviet Russia whilst German 
and German-American International Financiers control her. 
Should they lose control, Germany will join Russia and 
extinguish both them and Poland too in a colossal Soviet 
State which will ultimately, whatever damage it may do 
meanwhile, produce its own economic undoing, as surely 
as Soviet Russia left alone must do. 

Meanwhile, thrown over by France, may Great Britain 
accept the situation and be no more an overwhelming mili- 
tary power, but instead be warned by the example of once- 
powerful but now helpless Holland 1 May she become by 
far the greatest Sea and Air Power 1 May every man in 
her fighting services be rendered a host in himself as director 
of a fighting machine or machinery I May she so defend her 
frontiers that the British Empire shall become impregnable 
from without ; whilst within, upon her 12,000,000 square 
miles of territory, may there develop, under a sound monetary 
standard and Credit-right, a thriving, peaceful, populous, 
united, and unconquerable People 1 



OUR LEGAL TENDER LAPSE 

is the primary cause of our National Unresty 
and persistence in it prevents the remedy for 
the secondary cause — the cost of the War and 
its aftermath 

JOHN Locke (a.d. 1632-1704), financial expert and philo- 
sopher, author of the essay " On the Human Under- 
standing," was one of the original Directors of the 
Bank of England. The Bank of England still survives, 
and John Locke's philosophical writings are immortal I 
John Law (a.d. 1671-1729), financial expert and superficial 
thinker, devised Currency Notes, which ruined nations in 
his time, and now threaten to ruin more. 
Of these two men our Treasury prefers John Law. 
It is difficult to conceive why, unless one assumes that it 
is out of (surely not more than) verbal compliment to Bonar 
Law. 

John Law said in effect that Sound Legal Tender may 
consist of Paper, based on Government Paper or chunks 
of indivisible property. John Locke proved that it may not. 
He proved that sound Legal Tender cannot go outside 
itself for value, but must itself embody both standard 
value and security therefor. 

Because an abuse of this principle may pass muster 
in a comparatively small way, or in a larger way if the steps 
are rapidly retraced, our Treasury is likely to place us 

88 



" BROADSHEETS •* ON NATIONAL FINANCE 80 

amongst the human debris attributable to Law. Some 
of the consequences are besetting us now. 

Unemployment of ex-soldiers, dockers, and others ; 
ever-rising cost of living ; adverse rates of exchange ; 
decreasing supplies ; either higher prices or subsidies for 
bread, coal, shipping, and travel ; the rebellious spirit and 
social unrest amongst millions of the people : these are 
effects of great prices having to be paid for small values 
received, because the prices are measured in Legal Tender 
based on unsuitable Securities instead of Gold. 

Whatever is Legal Tender in a nation is the national 
standard of value. All standards of value are elusive things 
at best. 

But the fundamental standard of value, especially of 
Legal Tenders themselves, should be as little elusive as 
possible. 

Securities and most Commodities fail because they are 
relatively too variable in nature and deficient in necessary 
qualities, involving that constant uncertainty which pro- 
motes chaos in trading. 

€k>ld rose to the top in the efforts of ages to find a stan- 
dard having the necessary qualities whilst steady enough 
to stabilize trading relations and aims. Hence is the truth 
derived that 

Legal Tender not based on gold, or to the extent that 
it is not based on gold, lacks the qualities which produce 
stability in the economic condition of a country and possesses 
those qualities which lead to economic chaos. 

The Treasury objects to reversion to the gold standard 
in a way which admits that the effects that this reversion 
would produce would include a substantial reduction in the 
prices of commodities in general. 

The objection is that the National Debt must be repaid 
whilst prices are high, i.e., whilst the purchasing power of 
money is low, in order that the Debt may not be redeemed 



90 "BROADSHEETS" ON NATIONAL FINANCE 

with funds of greater value than those in which it was 
incurred {vide Mr. Stanley Baldwin in the House of Commons). 
Even if all should go well with the impossible Treasury 
Scheme, it would take fifty years to redeem the Debt. 

If all should go well with the scheme of the Treasury for 
reversion to the gold standard that would take fifty years 
too. 

When Alexander Hamilton (a.d. 1757-1804), for George 
Washington, in the day of the paper money called " Shin 
Plasters," found it prudent to make good the Government 
obligations and to pay interest on arrears, he paid at the rate 
of the gold value (not the paper-money or nominal value) 
of the currency when and in which the obligations had been 
incurred. On National Finance this had the effect of a 
Capital Levy. But he protected the Creditors from ultimate 
loss. He devised numerous alternative methods of payment 
from which the Creditor might make his whole choice of one, 
or part choice of several, with the effect that the development 
of the United States was promoted by a great and new 
diffusion of interests. This development was assured because 
the interests made it both practicable and tempting to all 
who wished to regain their nominal loss on the Debt and to 
make much more. 

This method of redeeming National Debt below par 
without ultimate loss to creditors might have been available 
to us by arrangement with the various Governments within 
the British Empire, because the British Empire is not 
relatively more developed now than the United States in 
Hamilton's time ; but the method is denied to us through 
our Treasury having prevented disclosure of the true price 
of gold in a constantly depreciating Legal Tender paper 
currency, in an utterly futile war-time effort to disguise 
depreciation. 

In our case the Debt, to be paid at all (as wisely and 
honourably it must), must be paid with funds of greater 



"BROADSHEETS" ON NATIONAL FINANCE 91 

value than those in which it was borrowed. Tliat is the 
consequence, mainly, of the monetary policy adopted through- 
out the war, when no artifice to avoid depreciation of the 
monetary standard was resorted to, and nearly every artifice 
to produce depreciation was adopted. 

The aUemative to repayment in funds of greater value 
would make the country impossible to live in. 

That alternative implies the fostering of Low Purchasing 
Power in money (i.e., high prices), as a deliberate depreciated- 
legal-tender pohcy. But such a policy must create an 
insatiable demand for more and more of the money that is 
of so little value for purposes of livelihood. The more of 
such money that is claimed and exacted, the lower its 
purchasing power must become : until business men despair, 
and wage-earners by the million grow frantic, in fruitless 
efforts to obtain enough in revenue and wages to meet 
legitimate needs. 

It should be needless to say that such a policy is an 
incitement to revolution. 

Revolution can never mean more in this country than 
that large sections of the community, driven desi)erate by 
misapprehension of their needs by conventional institutions, 
accept the offices of revolutionary fanatics to tear the 
seemingly insensate institutions down. 

That type of revolution is preceded by internecine strife 
amongst the people generally ; in which employers fight for 
enough funds to maintain industry and wage-earners fight 
to Uve. The spirit of the coming struggle is shown when one 
side invites the other to " do its damnedest." 

ADVERSE EXCHANGES— In the war-time efforts to 
disguise the depreciation by ourselves of our Legal Tender in 
our monetary policy. Sterling Bills and Cables of Exchange 
were said to fall in value with the rise in the adverse balance 
of trade, and vice versa. 

That this is not the true cause was proved when countries 



92 " BROADSHEETS " ON NATIONAL FINANCE 

which were debarred by the war from receiving supplies from 
America nevertheless had an adverse rate of exchange in 
Dollars. 

Further proof that this is not the true cause is being 
furnished to-day, when the balance of trade is improving 
between this country and the United States, but the rate of 
exchange shows no improvement. 

To-day the rate is clearly being affected not by the 
balance of trade but by the amount of credit permitted to 
be available by the Federal Reserve Board. And it is as 
easy to decree the rate of paper-controlled exchange as to 
limit the credit either for exchange purposes or general 
purposes. Their defenders justify them by claiming that 
Bills and Cables are a commodity which, like all commodities, 
rise in price when they are scarce and fall in price when they 
are abundant. 

Even if this were true, it would imply further that they 
are subject to that rigging of the market which at times 
besets all commodities, and which in this case would be easier 
than in any other, owing to the effectiveness of the control 
of the market. But these Bills and Cables are not com- 
modities. They run counter to commodities. 

If all the things which may be bought and sold in 
international trade be given the generic name Commodities, 
all the real commodities, gold, wheat, oil, cotton and so 
forth, might be enumerated as different species of this 
genus. When all had been classified, still another species, 
countering all the others, would be required, to round off 
the genus, in the form of these Bills and Cables. But none 
of the other species would have the same relation to all the 
rest that this one would have. 

The truth is that such a counter-species consists merely 
of symbols of the other species. To treat its constituents as 
commodities in a sale would be to sell the same commodities 
twice in once, which cannot be done ; a maker cannot 



"BROADSHEETS" ON NATIONAL FINANCE 98 

possibly obtain £dOO for £100 of his goods by selling the 
goods for £100, the invoice for another £100 and the Bill of 
Exchange for a third £100. Not being commodities Bills of 
Exchange do not respond to the laws of commodities. But 
being claims to a specific commodity, viz.. Legal Tender, 
the particular Legal Tender to which they have reference 
must respond to price according to quality, which is a rule 
of commodities ; and the Legal Tender always does thus 
respond : in an adverse rate of exchange when its quality 
is bad, and a favourable rate when its quality is good. 

If the Legal Tender money is not gold money, but paper 
money not fully covered by gold, the claims to it will not 
fetch gold par, but as much less than gold par as the market 
price of gold in that paper money shows this Legal Tender 
to be below gold par, i.e., below the gold standard. 

That accounts for the largest part of the difference in 
the Exchange on New York whereby we get Dollars only 
equivalent to £8 I7s. 9d. for every £5 lis. Od. 

Until the Treasury rectifies our Legal Tender currency, 
our Government has thus little or no control over our cost 
of living. 

Far greater power over it than our Government pK>ssesses 
is left, until then, in the hands of the Federal Reserve Board 
of the United States. Whether the serious financial crisis 
which threatens the United States should develop or not, 
this situation if allowed to continue must cost us dear. 

The method of rapid reversion to the gold standard 
is part of my scheme of credit-right. The method it is 
futile to criticize, because it is the only method where a 
method is imperative. 

This scheme, which I have long advocated in anticipation 
of this crisis, a scheme which would enable the conmiunity 
to bear the weight of the National Debt and save from bank- 
ruptcy many who would otherwise be ruined by a fall in 
prices, cannot be applied without reversion to sound Legal 



94 "BROADSHEETS" ON NATIONAL FINANCE 

Tender currency with its consequences of desirably lower 
prices and cost of living, because the credit, which is not 
Legal Tender, and therefore need not be based on gold 
itself, must nevertheless not only be estimated at and based 
on gold values, but be used solely to create new, or unburden 
old, properties productive of gold-values. 



STRIKES, LOCK-OUTSy AND FINANCIAL 
CONCENTRATION 

THESE are the three jfreat Prizes of up-to-date Political 
Economy. 

The workers swear by Strikes. The Right to Strike 
is the brightest Jewel in their Crown 1 

The Magnum Opus of the Employer is the Lock-out ! 

The Idol of the Government is Financial Concentration^ 
With them, Financial Monop)oly talks. 

But have these prizes any ultimate value ? 

" Value ? " Laughter holds its shaking sides at the 
mention of the word I 

The most conflicting ideas of value prevail. 

When the value of money is high, interest is high I 
That is the state of things to-day. 

When the value of money is low, prices are high 1 That 
also is the state of things to-day. 

High and Low I If Ministers and the Nation generally 
are content to believe that all can be well with economic 
policy, in face of such flat contradiction, then we are on the 
verge of further proof that " those whom the gods wish to 
destroy they fu^t make mad." 

Judged by the quaUties which distinguish a true standard 
of value, 

FINANCIAL CONCENTRATION, supposed to have 
high value — as in fact it has for a time to a few — has an 
ultimate value of less or worse than nil. 

95 



96 "BROADSHEETS" ON NATIONAL FINANCE 

(1) Because no such situation can endure ; its cul- 

mination brings its downfall. 

(2) Because the process of centralization of this world- 

power, as the multitudes begin to comprehend it, 
either by force of circumstances or by education, 
must raise such armies against it everywhere as 
will by repudiation and otherwise destroy the 
Credit System of the universe and lay waste all 
the populous centres of the civilized world. 

(3) Because the munber of industries encouraged by 

it are too few to employ wage-earners at com- 
petitive wages, and this deliberate limitation of 
industry in order to keep up a large market of 
cheap labour reduces production, both in kind 
and quantity, below the standard necessary to 
maintain in comfort the growing populations of 
the world. 

(4) Because the concentration of financial power in 

fewer and fewer hands as populations grow larger 
and more enlightened jeopardizes the whole 
capitaUstic structure, the right use of which is 
essential to modem civilization, but the abuse of 
which by checking the distribution of the right 
to credit, although continually increasing the 
credit total, has reached the breaking point. 

(5) Because the power of finance to transfer industry 

from one country to another is being caught up 
rapidly by rapid diffusion of the principle of solidar- 
ity and co-operation amongst unions of enhghtened 
wage-earners throughout the world. 

(6) Because finance being the only efficient machinery 

by which general prosperity can be achieved, it 
can no more be permanently cornered, by a few 
magnates holding the rest of the world to ransom, 
than can air and light 



"BROADSHEETS" ON NATIONAL FINANCE VI 

(7) Because no small number of men can for long hold 

unchallenged the master-key to the fate of millions 
upon millions of their fellow-men. 

(8) Because the productiveness of the earth is inex- 

haustible, but is being held in check by the policy 
of financial concentration, 

(0) Because the wider diffusion of financial freedom 

is the Open Sesame to abundance of commodities 
for all. 
(10) Because the policy of concentration of fint^cial 
power is absolutely restrictive and largely 
destructive, whilst the diffusion of financial power 
is only relatively restrictive and may be wholly 
productive. 
LOCK-OUTS have little National value— 

(1) Because Lock-outs are merely strikes of Employers. 

(2) Because a general Lock-out is equivalent to a general 

strike and equally suicidal. 
(8) Because the gain of holding up production by means 
of Lock-outs is lost in subsequent mal-adjustments, 
decreased effective demand and means to consume. 

(4) Because the Nation suffers when Employers lock 

out Workers and either transfer industry or abandon 
it. 

(5) Because Lock-outs are only efficient as industrial 

warfare when industrial peace is essential to 
industrial prosperity. 

(6) Because Lock-outs shut down institutions which 

ought to be profit-earning and tax-paying ; and 
in a community properly organized economically 
always are.* 

(7) Because Lock-outs devised to lower wages by swelling 

the ranks of the unemployed in times of high 
prices, which no lock-out can reduce, tend to serious 
social disorder. 

a 



98 "BROADSHEETS" ON NATIONAL FINANCE 

STRIKES have no value— 

(1) Because they are self-destructive, i.e., strikers 

abandon their own means of subsistence and 
must either starve to death, find other employment, 
or give in. 

(2) Because the further strikes are extended, and the 

more strikers that are involved, the more are the 
means of subsistence that are abandoned, the 
more numerous will be the strikers that will starve 
and the less chance will there be to find other 
employment ; unless armies of strikers commit 
wholesale blacklegging and thus end the strikes 
by merely exchanging employment. 
(8) Because Strikes put an end to the production which 
supports not only the strikers but the community 
of which the strikers form a part and thus occasion 
organic disease in the body-politic to which the 
strikers belong, akin to that of heart, stomach or 
lungs ceasing to function in a human body. 

(4) Because Strikes cause the most efficient workers 

to emigrate rather than blackleg, leaving the less 
efficient behind, reducing working-force efficiency 
and productiveness, and lowering the rate of 
remuneration which the industry affected can 
ultimately pay. 

(5) Because Strikes tend to foster the growth of industry 

elsewhere at the expense of industry in the strike 
area, and so to reduce the demand for the services 
of the strikers. 

(6) Because the only efficiency which strikers possess 

in a National sense is efficiency to destroy. 

(7) Because Strikes are an aid to the demoralization 

of domestic life and the promotion of domestic 
misery, whilst they never bring higher wages than 
coiild have been obtained without strikes. 



"BROADSHEETS" ON NATIONAL FINANCE M 

(8) Because Strikes are the open door to riot and dis- 

order and their anti-social consequences. 

(9) Because Strikes of any magnitude derange every 

walk of National life. 

(10) Because the greater the strike the greater the ruin. 

(11) Because Strikes involve no more brain power than 

the kick of a mule. 

(12) Because the essential principle of the strike is that 

of the dog in the manger. 
(18) Because Strikes are a colossal wastage of labour at 
a colossal monetary loss to labour itself and very 
material loss to the community. 
(14) Because Strikes are quite incapable of maintaining 
themselves, although a high degree of self-mainten- 
ance is one of the essential qualities of real value. 
Those three prizes : Strikes, Lock-outs, and Financial 
Concentration, are thus a delusion and a snare, urging us 
on to disaster ; but (1) Sound Legal Tender as a true standard 
of value ! (2) Productive Credit-right I (8) Encourage- 
ment of Production, not merely production in the sense of 
more coal-getting or brick- laying by individual wage-earners, 
but Production of all kinds by nation-wide private enterprise 
to the limits of economic equilibrium ! These three would 
save us t 

They would reduce the cost of living. 
They would increase the supplies necessary for Home 
Consumption and for both Home and Foreign trade. 

They would create that legitimate competition for the 
services of wage-earners by which alone wage-earners will 
ever come into their own. 

They would multiply business in quantity and power 
to an extent which would make the load of National debt 
and the return u|X)n investments an easy burden. 

They could be forced through the Ballot Box, for wage- 
earners are numerous enough. 



100 "BROADSHEETS" ON NATIONAL FINANCE 

Neither Financial Concentration, Lock-outs nor Strikes 
will lower prices or increase supplies or raise real wages. 

Such sinister policies create two destructive armies I 

On the one hand, the Inner Ring of High Finance direct- 
ing and controlling the strategical use of Money and Credit 
— the greatest force extant whilst contracts remain good ; 

On the other hand, a few Leaders of Labour and of 
general Wage-Earners who direct and control strategically 
the mass-service of the people. 

The Leaders of Finance misdirect their force to con- 
centrate all power into their own hands. 

The Leaders of Wage-Earners also misdirect their force 
with the like object of concentrating all power into THEIR 
own hands. 

The vaulting ambitions of neither can succeed ; the 
obHgations involved forbid ! 

The outcome can only be either Kaiserism or Bolshevism 
(which is merely chaotic Kaiserism) or Chaos itself. 



NOTES ON ALTERNATIVE TAXATION 
AND CONDITIONS 

TO THOSE INVOLVED IN THE LAST BUDGET! 

IF THE LAST BUDGET HAD BEEN RECON- 
STRUCTED ON THE LINES OF THESE NOTES 
PREPARED AT THE TIME (1) THERE WOULD 
HAVE BEEN NO UNEMPLOYMENT AT THE PRESENT 
TIME, AND COMING UNEMPLOYMENT WOULD 
HAVE BEEN AVOIDED, BECAUSE THE DEMAND 
FOR SO MANY KINDS OF WAGE-EARNERS WOULD 
HAVE BEEN SO INSISTENT; AND (2) THERE 
WOULD HAVE BEEN NO COAL STRIKE BECAUSE 
THEIR PRESENT WAGES WOULD HAVE BEEN 
WORTH 28 PER CENT. MORE TO THE MINERS 
THAN THEY ARE WORTH NOW. Bad Finance is 
making Economic Conditions intolerable, and thereby placing 
power in the hands of Extremists on both sides of the In- 
dustrial War. 

The Treasury requires Revenue on a great scale with 
which to meet corresponding estimates of expenditure. 

As provided for in the present Budget, the Revenue 
will suffer through the Law of Diminishing Returns whereby 
excessive Taxation of Production, and of Incentive to 
Production, defeat its own ends. 

Moreover, through scarcity, higher costs, and further 
obligations, the Estimates are certain to be exceeded. 

101 



102 "BROADSHEETS" ON NATIONAL FINANCE 

If the present Budget is to be persisted in these tendencies 
must be counteracted by special conditions. 

These conditions would be created if the Gold Monetary 
Standard were restored and Credit-right estabHshed. 

A. THE GOLD MONETARY STANDARD would 

(1) lower prices to the gold basis ; the fall may be 

gauged by the present market price of gold at 
£5 35. Od. per ounce (now £5 17*. Od.) and the mint 
price of £3 17s. 9d. ; not only gold, but all commo- 
dities, would fall in price in this ratio ; 

(2) reduce the costs of government and so tend to 

prevent the estimates from being exceeded ; 
(8) reduce the cost of living and tend to eradicate 
unrest ; 

(4) render production of goods possible at economic 

prices ; 

(5) tend to balance adverse exchanges ; 

(6) create a world-wide demand for sterling bills, owing 

to the fact that sterling would have a higher 
purchasing power than any other medium of 
exchange in the world ; 

(7) make foreign countries eager to supply us with all 

the raw materials needed for both home consump- 
tion and export, for the sake of acquiring claims to 
sterUng for the purchase of our manufactures at 
the prices which, in sterling, would be so com- 
paratively low ; 

(8) enable the Treasury to sell Bills on favourable 

terms wherever it required funds with which to 
buy up maturing Bills or Debt held in a foreign 
country ; and 

(9) reheve the sufferings of those with fixed incomes 

the value of which the changed money standard 
so seriously depreciated. 



'BROADSHEETS" ON NATIONAL FINANCE 100 

B. CREDIT-RIGHT would 

(1) Save from Bankruptcy those traders whose enter- 

prises are adapted to high prices and who therefore 
would suffer great losses in a general drop in prices 
to the gold standard ; 

(2) promote production in all directions to the utmost 

capacity of the consuming markets, including both 
home and exp)ort ; 
(8) reduce unemployment to a minimum, maintain 
high wages through competition for wage-earners, 
increase the employment of labour-saving machinery 
to a maximum, and entice surplus shopkeepers 
into more productive work, with the effect of 
causing blocks of shops to be converted into blocks 
of residences as a cure for the housing shortage ; 

(4) release vast sums from mortgages and debentures 

for investment in Government loans, bonds, and 
other securities or in fresh enterprises here and in 
the British Dominions, Colonies, etc. ; 

(5) displace the cost of the mortgages and debentures 

from being a crushing burden on existing productive 
industry ; 

(6) reduce interest from 7 per cent, or 8 j)er cent, to 

approximately 8J per cent., but restore capital 
values of securities reciprocally. This position 
would favour refunding operations and reduction 
of the service of the National Debt ; 

(7) reduce local rates ; and 

(8) give a national privilege to productive concerns 

which would encourage and facilitate the fbdng of 
capital in this country on a scale which would 
DEFLATE EXISTING CREDIT by putting more 
realities in the form of new and true Capital Values 
behind it. 



104 "BROADSHEETS" ON NATIONAL FINANCE 

HOW THE GOLD STANDARD MAY BE RESTORED. 

(1) Remove the cheque tax. 

(2) Promote a National campaign for extending the 

use of cheques and the keeping of banking 
accounts. 
(8) Tax the use of legal tender by increasing the stamp 
for receipts of amounts from £l upwards. 

(4) Retain present stamp poundage for receipts of 

cheque payments. 

(5) Issue no further Treasury Notes of higher denomina- 

tion than 5*. 

(6) Open continuous loan for subscription by Treasury 

Notes to be cancelled as they are received. (Sub- 
scriptions need not be encouraged to an extent 
which would remove the notes from circulation 
too rapidly, i.e., in fewer than 93 days.) 

(7) Meet the expense of cancellation of the notes out 

of revenue or the proceeds of a separate loan. 

(8) Close the loan for Note Cancellation when the notes 

outstanding equal in nominal amount the gold 
reserved against them. (The gold standard of legal 
tender would then be in force.) 

(9) For a necessary period convert the present Bank 

Cash Reserves from Treasury Notes into short 
date Treasury Bills. Further reserves, on which 
further Bankers' credit in addition to that now 
outstanding could be based by the Banks, should 
consist only of gold deposited with the Bank of 
England. 

(10) If existing Banks are unable to cope with the large 

increase in accounts and cheques, introduce the 
current account system into the Post Office 
Banks. 

(11) Encourage the adoption of all known facilities for 
certifying cheques and transferring credits. 



♦BROADSHEETS" ON NATIONAL HNANCE 105 

HOW CREDIT-RIGHT MAY BE APPLIED. 

(1) Utilize Banking Machinery accentuated by the 

extended Cheque System. 

(2) As Bankers may now fabricate Credit as Loans 

against Securities, permit owners of Productive 
Properties (Manufacturing, Agricultural, Transport, 
etc.) also to fabricate Credit by virtue of Credit- 
right vested in such properties up to 50 per cent, 
of their gold coin value, and to treat that Credit 
like the properties as their own, not as their Bankers' ; 
to be used by themselves free of charge ; just as 
the Banker uses as his own the credit he fabricates 
against the Securities of others free of charge to 
himself, whilst lending it to borrowers at something 
above Bank Rate payable to himself. 
(8) Limit the application of the Credit to productive 
purposes ; i.e., the creation of new instruments 
of production, the extension of old instruments of 
production and the redemption of existing charges 
upon these. 

(4) Give the fabricators of this productive credit the 

necessary use of Banking Machinery at a charge 
made by the banker for keeping the account. 
Make the charge 1 per cent, for the first year and 
\ of one per cent, for every succeeding year, on 
the full amount of the credit during the period in 
which any part of it is still outstanding. 

On a thirtieth and final instalment this final 
J of 1 per cent, would thus represent 15 per cent. 

(5) Make the Credit redeemable by a fixed number of 

annual instalments according to the ability to 
pay judged by the probable life of the Income 
from the property in which the right to the credit 
is officially vested. 

(6) Charge the property as security to the amount of 



IOC "BROADSHEETS" ON NATIONAL FINANCE 

• the credit and also with the redemption of the 
credit. 

Supplement this with the guarantee of the 
Treasury in order to make every such Credit a 
portion of the National Credit. 

For this guarantee the fabricator of each 
special credit would pay the Treasury a sum equal 
to one-twentieth of the credit taken up. 

This fee should be payable apart from the 
credit, not deducted from it. 

(7) Make the fees a Treasury Reserve held against any 

future financial emergencies. 

The Reserve would eventually become large 
enough to support, if need be, the whole financial 
system of the British Empire. It should be kept 
at the Bank of England until extension of the 
plan throughout the Empire enabled it to be 
divided over the Empire and safe financial centres 
in other countries also. 

(8) Create an Advisory Council to the Treasury which, 

amongst other things, would aim to prevent either 
Productive Credit or Bankers' Credit from being 
used to promote over-competition in any particular 
Industry, and thus aim to establish equilibrium 
between production and marketability. 

Over- competition would also be limited by 
the many different old and new occupations which 
would then be open to the people. 

Over-competition, like that in present-day 

shop-keeping, is due to the fact that so few other 

means of livelihood are open to the persons who 

open superfluous shops. 

NOTE. — The Credit-right Principle is necessary to the 

restoration of the Gold Monetary Standard. The 

extension of the Cheque System is necessary to both. 



"BROADSHEETS" ON NATIONAL FINANCE lOT 

We are the only people capable of a cheque system on 
the necessary scale. Hence this country has the oppor- 
tunity to place itself well in the van of all the nations 
in attaining to power and prosperity never before 
attained by any nation. 

ASSUMING THAT THE BUDGET MAY BE CHANGED. 
ITS UNSOUND FEATURES ARE : 

(1) The Cheque Tax, which should be abolished. 

(2) The Excessive Income-Tax, which should be reduced 

and the minimum for exemption raised. 
(8) The Excessive Super-Tax, which also should be 
reduced. 

(4) Excess Profits Duty, which should be abolished. 

(5) The proposed Corporations Tax, which should not 

be imposed. 

They are based upon a sectional view of Industry, 
which they promote to the detriment of the opposite view. 

There is a standing and much-abused antagonism in 
modem Business. This exists between : 

The controllers of Banking, Credit and Money on the 
one hand, and 

The practical Commercial and Industrial Conmiunity 
on the other. 

The Financial Conmiunity endeavour to make media 
of exchange relatively scarce and dear to independent 
Commercial and Industrial Concerns ; whilst 

The Commercial and Industrial Community are depend- 
ent on the condition that media of exchange shall be relatively 
plentiful and cheap. 

The Budget is wholly on the side of the Financial 
Community in enabling them to make Credit, which is the 
chief media of exchange, both very scarce and very dear as 
and when they choose. It must not only deprive many of 
the Commercial and Industrial Community of eidsting 



108 "BROADSHEETS" ON NATIONAL FINANCE 

resources, but must also prevent the accumulating of further 
ones, thus leaving them at the mercy of the great financiers 
who are bent upon forcing the greater industries (and in the 
process extinguishing minor necessities of the people) into 
world-trusts, controlled by themselves, to be wrecked, 
however, by the upheaval of the dissatisfied Industrial 
Armies of workers that the Policy will produce. 

The aforesaid Taxes are all Taxes either on Production 
or on Incentive to Production, tending to restrict Production 
at a time when its expansion, all statesmen agree, is a prime 
necessity. 

The Taxes cripple production by appropriating the 
funds needed for the development, and even the maintenance, 
of existing instruments of production, as well as for the 
establishment of further ones. 

These Taxes thus strike at the very roots of their own 
and the nation's support. 

ALTERNATIVE TAXATION. 

The alternative to taxation on Production, and on 
Incentive to Production, is Taxation on Consumption. 

Examples of sectional taxes on consumption are Excise 
Duties and Entertainments Tax. 

A National Tax, ignoring sections of the nation, would 
be a tax on general consumption. The rate should be 2d. 
in the shilling (i.e., from one-halfpenny in threepence to 
8s. Ad. in the £). 

The Tax, in order to avoid its being a tax on production, 
should be imposed only on Finished Products delivered to 
the Consumer. The Entertainments Tax is not imposed or 
paid until the Consumer is receiving the entertainment. 

Most Entertainments would never eventuate if the Tax 
were a charge upon their production. 

So with every other product ; the more its production 
is taxed, and the more the service rendered in producing it 



"BROADSHEETS'* ON NATIONAL FINANCE 100 

is taxed, by punitive taxation of profits, the less of the 
product will be produced, and the less will be the incentive 
to render the public service of producing it. The consequence 
is that the product will become both very scarce and very 
expensive. 

Contrariwise : The removal of such Taxes both increases 
and cheapens production. 

In these conditions the suggested National Tax on 
general consumption of Finished Products substituted for 
Taxes on Production would so cheapen goods that a loaf, 
for example, would cost less, including the National Tax, 
than it now costs without such a Tax and with the price 
kept down by subsidy. 

The National Tax would yield fully £400,000,000. 

It is sometimes said that all Taxes are paid by the 
Consumer. The truth is this. If Taxes on Production 
can be f>assed on to the Consumer, Production continues ; 
if not, then Production either decreases or ceases. Hence, 
when Production is the prime national need, Production 
should not be taxed, either directly or by diminishing 
incentive. 

Competition, when the means exist, prevents the 
Producer from abusing this position. (Within reason, 
Credit- right provides the means.) 

The collection of the National Tax on the consumption 
of Finished Products could proceed on the lines of that of 
the Entertainments Tax : 

(1) Stcunps on purchases. 

(2) Collection on certificate after provision of sureties, 
etc. 



*' WORK WHILE YE HAVE THE LIGHT T' 

BURN THE INFLATED PORTION OF OUR PAPER 
LEGAL TENDER 

THE gathering darkness accelerated by the Coal Strike 
has lifted a little owing to a partial and temporary 
settlement with the Miners. 

This cloud was the blackest and nearest of many. 
None of them is yet dissipated. Their causes — purely 
economic and preventable — are still in full operation. 

Will this peaceful respite be utiUzed for the removal 
of those causes, of which the fundamental ones are depre- 
ciated Legal Tender Currency, and the need of Productive 
Credit-right ? Or will the State be allowed to drift into 
all the horrors of a Monetary Debacle ? 

These horrors were produced by the Shin-plasters of 
the American War of Independence, the Assignats of the 
French Revolutionary Period, the Greenbacks of the American 
Civil War, and the Rouble of Russia to-day. 

" In France, in September, 1790, it became 
impossible to meet the payments of the Public Debts. 
The relief obtained by the first issue of Assignats was 
too small to last long, and the ease with which it was 
prociired caused a speedy recurrence to the same 
resource." 

" Mirabeau proposed to create new Assignats." 
The proposal was carried despite the speeches of Talley- 

110 



"BROADSHEETS" ON NATIONAL FINANCE 111 

rand, Antoin Morin, D^r^tat, and Dupont dc Nemours, 
pointing out "the RUIN AND MISERY THEY WERE 
CERTAIN TO BRING ON THE COUNTRY." 

The last-named said, referring to the aforesaid Shin- 
plasters : 

** You have a striking example before your eyes. 
There was, ten years ago, in the United States of America, 
a paper currency secured like the one you propose, 
on the honour and loyalty of the whole RepubUc, and 
on an enormous amount of landed property, and by 
the safety of the State. Well, in spite of all that 
Congress, Washington and Franklin could do, a pair of 
boots sold for £86,000 in paper^ and a supper for four 
persons, for which ten dollars was the u^ual price, cost 
£50,000 in paper.'' 

Such arguments were ignored by the Assembly. Yet 
they were abundantly justified. The authorities in France 
took drastic steps in regard to prices. 

" These measures caused an almost entire cessation 
of trade. Most of the shops in Paris and other towns 
were shut. The retail dealers had purchased at higher 
prices than the maximum and were speedily ruined." 
Note below what II. G. Wells says of Petersburg to-day and 
compare it with this description of Paris. 

" Those who could keep going, only exposed for 
sale their goods of the worst quality at the maximum, 
and reserved the best for those who came to buy them 
in secret, at their real value. Where formerly there 
had been so much Ufe and animation, there was now 
nothing but a sepulchral silence, and the shopkeepers 
barricaded their doors, ready to escape by the back 
at a moment's notice, on the appearance of the revolu- 
tionary commissioners. 

" The populace was seized with fury on seeing 
the natural result of these measures, and besieged 



112 "BROADSHEETS" ON NATIONAL FINANCE 

the legislature for new and more rigorous laws to compel 
the dealers to continue their trade. 

" The meat was diseased and all sorts of provisions 
were increased in quantity and weight by the most 
abominable adulterations." 

The Assignats destroyed alike the notions of value 
and of money, multiplied prices four thousand times and 
made way for Napoleon ! 

Russia is suffering like horrors to-day due to the Mone- 
tary System — horrors coming more slowly and in a milder 
form to the United Kingdom ! 

This is what H. G. Wells says (in The Sunday 
Express) : 

*' All these shops have ceased. There are perhaps 
half-a-dozen shops still open in Petersburg. There 
is a Government crockery shop where I bought a plate 
or so as a souvenir for seven or eight hundred roubles 
each. 

" The shops have an utterly wrecked and abandoned 
look ; paint is peeling off, windows are cracked and 
some are broken and boarded up, some still display 
a few fly-blown relics of stock in the window, some 
have their windows covered with notices ; the windows 
are growing dim ; the pictures have gathered two 
years' dust. They are dead shops. They will never 
open again. 

" The roads are full of holes, like shell holes, often 
two or three feet deep. Frost has eaten out great 
cavities, drains have collapsed, and people have torn 
up the wood pavement for fires. Every wooden house 
was demolished for firing last winter. Every one is 
shabby. The death rate in Petersburg is over 81 per 
1,000. All trading is called ' speculation ' and is now 
illegal. But a queer street comer trading in food and 
so forth is winked at in Petersburg and openly practised 



"BROADSHEETS" ON NATIONAL FINANCE 118 

in Moscow, because only by permitting this can the 

peasants be induced to bring in food. 

" An egg or an apple (where it can be obtained) 

costs 800 roubles. The credit and industrial system 

that produced commodities has broken down. . . . 

So that nowhere are there any new things." 

That is the situation in process of development in Russia 
which will ultimately throw it back into a state of a primitive 
agricultural community after first making it a desperate 
robber nation at war with half the world and a bone of 
contention among Military Powers. 

Our cheque system which has saved us from so deep 
a depreciation of our Legal Tender Currency is losing its 
power to save us further because our credit and industrial 
system too is breaking down. Costs of Products are begin- 
ning to exceed their value, because the cost of living controls 
organizations that have no means of counter-controlling 
the cost of living. 

We are wrong in our conception of the relations between 
Balance of Trade, Foreign Exchange and Sound Legal 
Tender. 

The Greenbacks of the Northern States in the American 
Civil War, during the Inflation Period after the war, caused 
the cost of living in 1865 to reach, according to Noyes, 
the highest point recorded in the country's history. It 
was removal of the need for so much of this Legal Tender 
by the extension of the Clearing House System which 
temporarily permitted the resumption of Specie payments 
and brought Foreign Exchange to but a trifle below Gold 
Point. But more was needed. 

It is a false idea of the flnal solution of the problem 
of the depreciated Greenbacks which has to-day led astray 
governments, economists and financiers. It was the Wheat 
Famine in Europe in 1897 which, through a prodigious 
wheat crop of its own, enabled America to restore its Foreign 

H 



114 "BROADSHEETS" ON NATIONAL FINANCE 

Exchanges and its whole financial position ; not however 
because of its wheat Exports, as our own false Export notion 
assumes, but because of the Manufactures and the Gold 
that were received in exchange therefor. Both the gold 
and the Manufactures together struck the balance between 
the commodities exchanged. But the Gold did much more. 
It provided the Legal Tender Greenbacks mth the necessary 
backing of gold and thus supplied the only foundation on 
which could rest the Resumption Act and all that this meant 
in sound internal trading. 

That is a vital, imperious, sovereign distinction ; a 
master-key to the exchange problem. 

Disparities in international exchange rates bear no 
fixed relation to adverse trade balances. The United 
Kingdom owes the United States hundreds of millions 
of pounds and incidentally the money of the one country 
is below par in the money of the other country by 28 per 
cent. 

Germany owes comparatively little to the United 
Kingdom, yet its money is below par in our money by nearly 
1,000 per cent., depreciated though our money is. 

It might be said that the Indemnity provides the requisite 
colossal adverse balance. But Germany owes comparatively 
little to the United States for goods, etc., and nothing as 
Indemnity ; yet its money is below par in dollars to an 
even greater extent than it is below Sterling. 

These considerations refute the argument that the 
balance of trade is any more than a condition of some of 
the phenomena exhibited by adverse rates of exchange 
in respective moneys. 

Advocates of the doctrine that adverse rates of exchange 
are regulated by adverse balances of trade prove too much. 

Observe this diagram : — 



i 



BROADSHEETS" ON NATIONAL FINANCE 115 



GOODS 
S£NT TV 



Arm n^ppKAtma in 

O^trrrhmfminq Jtorti'ot 
a^Out Geo OS <mj\H4t 



* Goods • 



O. 5 J\, 

ClctimA 
to 



f • 



• British/ 1* 
\ to ; 



Nl SO'CAUe^ 

KjhfAJ^Hi IN 



*Goods t 

• • J* 

• recei k^w ; 

j Uv , 



G0005 

ff£C£fV£D 
//v 

CAT. 



By showing that the negotiation of Bills through Bankers 
and the Money Market blocks the way to the transfer of 
commodities from U.S.A. to U.K., and vice versa, this 
diagram indicates that if the Balance of Trade regulates 
the rates of monetary exchange, it is also true that those 
who deal in monetary exchange regulate the Balance of 
Trade. Thus the Balance of Trade argument begs the 
question. It is certainly tnie that those who deal in monetary 
exchange regulate the balance of Trade. 

The point might be driven home with great force in 
connexion with the final Financial Blockade of the Great 
War. Suffice it to say, however, that unless the stoppage 
of these financial faciUties could stop the passage of 
commodities no such financial blockade would ever be 
possible. 

This financial control, through the Money Market, 



116 "BROADSHEETS" ON NATIONAL FINANCE 

over Trade and Commerce, may be used either to supply 
or to deprive nations or individuals of all or any commodities. 
Amalgamation of Banks nationally and internationally, 
if the legal right to productive credit is not also created, 
thus constitutes a menace which may reasonably excite 
alarm. The truth is that rates of monetary exchanges 
are dependent almost entirely on the moneys them- 
selves. 

In fact, the disparity in the prices of gold in the different 
moneys is the disparity in the rates of exchange, subject 
only to small details of trading technique. Some say our 
Legal Tender has not fallen, but that the price of gold has 
risen and thus they account for the high premium on 
gold. 

But the price of gold can neither rise nor fall if the 
money in which the price is quoted is the gold itself or an 
equivalent in legal tender paper backed by 100 per cent, 
of such gold. Every effort to cure the disparity (1) be- 
tween our Legal Tender and Dollars in exchange and (2) 
between our Legal Tender and Gold (two ways of stating 
the same thing), merely by balancing Trade, will prove 
abortive. 

When our Legal Tender Money is brought again to the 
Gold Standard, as is yet possible in the requisite time by 
means of our cheque system, we shall arrive at the true 
cure for our economic crisis. Prices will fall in a way which 
will reciprocally increase the purchasing power of our money. 
Low Prices in standard Sterling will bring Gold, Raw 
Materials and Orders here in abundance and take away 
Exports in the form of Manufactures and Services that 
will mean ultimate extinction of debt on much easier terms 
than those now being incurred, and national prosperity 
meanwhile. 

The harm done by low prices to traders now dependent 



"BROADSHEETS" ON NATIONAL FINANCE 117 

on high prices must be offset by instituting Productive 
Credit-right. 

Our present pohcy in Money and Finance gener- 
ally is leading to increasing strife and sectional starva- 
tion. 



MR. McKENNA ON '' MONEY AND 
FOREIGN EXCHANGE.'' 

OBSERVATIONS ON THE RT. HON. REGINALD 
McKENNA'S MANCHESTER SPEECH ON MONEY 
AND FOREIGN EXCHANGE. 

MR. McKENNA says : " Before the War and indeed 
until recently, international exchange was little 
understood outside a very Hmited number of experts." 

That sentiment accords with the following, which 
was written by the late G. J. Goschen : " But comparatively 
few, even of leading bankers and merchants, with the 
exception of those who are exclusively or mainly engaged 
in international transactions, are as conversant with the 
subject as its immense importance deserves." 

That sentence from Goschen's Standard Work on 
Foreign Exchanges is as true now as it was in the nineties. 
Skilled Bankers may work in a highly efficient manner 
with tools which they misapprehend, as skilled carpenters 
may work efficiently with tools which they did not either 
devise or make and of wliich they know nothing more than 
that particular tools may be put to certain special uses. Yet, 
as Mr. McKenna admits, " A misunderstanding of the nature 
of money and of the problems of international exchange may 
have very disagreeable consequences." 

A fuller understanding of money and exchange would 
probably have suggested the word " tragic " rather than 

118 



"BROADSHEETS" ON NATIONAL FINANCE 119 

merely *' disagreeable," because first revolution, then 
Bolshevism, under one name or another ranging from 
Communism to Despotism, with warfare inevitably supreme 
as both Government Policy and National Business ; and 
finally, general social collapse, are amongst such conse- 
quences. 

That is the " level of calamity to which a currency 
may fall." Russia, even yet, has not plumbed its lowest 
depths. 

Nearly all Europe and the United States are sinking 
into the slough. This country, at least, if no other, could 
be saved from such wreckage (and thereby be made strong 
enough to help the rest) did certain bankers and statesmen 
truly apprehend " the natiure of money and the problems 
of international exchange." 

Fortunately for him — as it relieves him morally of a 
terrible responsibility — Mr. McKenna does not understand 
the nature of money. 

Using the word Currency as synonymous with Money, 
he says : " Our currency derives its value from the law 
which ' declares it to be L^al Tender for an amount equal 
to its face value.' " This is inaccurate, because if value 
could thus come from law the Treasury could print enough 
Legal Tender to make everybody wealthy forthwith. 

Mr. McKenna says : *' The value of gold currency is 
determined by legal enactment." But that legal enact- 
ment merely states, for the benefit of the Community, 
that a certain quantity and quality of gold has a certain 
value ; through the Mint it turns out that quantity and 
quality of gold in a certified form, which it then protects 
from being tampered with or imitated. 

It is the gold, not the legal enactment, which gives 
the value. As to precise quantity in a unit, Legislation 
merely registered Custom. 

The following accurate definition of Money is taken 



120 "BROADSHEETS" ON NATIONAL FINANCE 

from Charles Conant*s Principles of Money and Banking : 
" The definition of Money which will be adopted 
in this work is that commodity of intrinsic value accept- 
able in exchanges which has become by law or custom 
the usual tender for debt. Put into more popular 
language, this means that the term money, under 
existing conditions, is appUcable to gold or silver coin, 
and should not be extended to the various forms of 
paper which economize the use of money. For most 
practical purposes, gold bullion held in bank reserves 
is properly classed as money, and falls within the 
definition given. It will be seen hereafter that in the 
actual use of money in domestic transactions the coin- 
age of the metals is an important factor ; but in foreign 
trade bullion is quite as useful as coin, and in domestic 
use bullion in bank reserves may be said, in a sense, 
to be serving the purposes of coined and circulating 
money through its paper representatives. The use 
of the word money is extended by many authorities 
to different forms of credit obligations — by some to 
redeemable Government paper or redeemable bank- 
notes ; by others to irredeemable paper of either type ; 
and by still others to the checks (cheques) deposit 
entries and various written instruments which are 
employed in carrying on exchanges. The difficulty 
about these extensions of the definition beyond coined 
metal of intrinsic value is that there is no logical point 
at which the things included in the definition of money 
terminate. If the definition is extended to instruments 
of paper credit, it is not clear why it should stop with 
legal-tender instruments and fail to include bank- 
notes which are not legal tender. If it is extended 
to the latter, it is not clear why it should not extend 
also to foreign bills of exchange, which are kept by many 
of the European banks as a part of their coin reserves, 



'BROADSHEETS" ON NATIONAL FINANCE 121 

ready to be sold for coin whenever they have need 
for it. . . . In so far as this theory ignores the necessity 
for intrinsic value in the material of moneys it is likely 
to lead to grave errors." Vol. I., Book I., Pages 4-6. 
Our Treasury Notes, therefore, in so far as they are 
not fully backed by Gold, arc not Money, but Money- 
substitutes to be classed among '* the various forms of paper 
which economize the use of money." The fact tliat gold 
sovereigns are Legal Tender for face value, when gold is 
at a high premium in Treasury Notes, does not give the 
< .\' !( ign any value but takes some value away. Its effect 
i>> to deprive the sovereign of its Legal Tender Currency 
function by driving it into secret places and service or 
abroad — anywhere out of range of such extraordinary 
law. 

" Par of exchange between countries is a constant 
ratio by law," because other countries conformed to the 
unit of standard gold which had been adopted by law in 
this country in 1816, but so adopted because John Locke 
had proved over one hundred years before that Custom had 
already established it. 

It is quite true, as Mr. McKenna says, that " when 
this ratio varies, gold leaves the country with lower exchange 
and goes to the country with higher exchange." Hence, 
the more adverse the ratio the more adverse the exchange, 
and, consequently, the less adverse the ratio the less adverse 
the exchange. The adverse ratio means less gold-backing 
to the legal tender unit concerned, which is generally de- 
preciated, unsound, insolvent legal-tender paper. 

This flagrant cause of an adverse exchange (which may 
be rapidly remedied without injury to High Finance, if 
High Finance is not permitted to order everything in its 
own high-handed and narrow-minded fashion) Mr. McKenna 
makes no reference to. But Foreign Exchange experts 
have not ignored it. 



122 ** BROADSHEETS » ON NATIONAL FINANCE 

Referring to Depreciation of the Currency, Goschen 
says {Foreign Exchanges, page 64) : 

" We have thus discovered an influence 
which apparently affects the fluctuations in 
the foreign exchanges far more powerfully than 
any previously discussed ; interest of money, 
a balance of debts over claims, panic, distance, 
and so forth, practically cause the exchanges 
to vary within a few per cents. ; a variation 
of ten per cent., owing to all these circumstances 
combined, is considered something extraordinary, 
and only occurs under rare combinations. but, 
as soon as the element of currency is introduced, 
we have had at once an instance before us in 
THE Vienna Exchange of a variation of fifty 
PER cent." 

This proves that the more depreciated the Legal Tender 
Currency, the more adverse is the ratio and by consequence 
the more adverse is the exchange. 

In other words, just as price-levels generally, in a 
depreciated Legal Tender Currency, might be high, the price 
of exchange for better Legal Tender must be high. 

Mr. McKenna is therefore in error in stating that " the 
ratio of exchange between any two countries is normally 
determined by the ratio of their general price-levels." 

This is a confusion of cause with effect, a case of putting 
the cart before the horse, for it is the ratio of their general 
price-levels which is determined by the ratio of exchange ; 
which again is determined by the character of the Legal 
Tender Moneys. (At one time prices in America were 
always higher than in the United Kingdom for no other 
reason.) 

Mr. McKenna himself proves the weakness of his argu- 
ment by first citing general price-levels as the cause and then 



"BROADSHEETS" ON NATIONAL FINANCE 128 

modifying this cause by others which are really no more 
than further effects of depreciated Legal Tender. 

He says : ** Without any alteration of price-levels '* 
international exchange may "show wide fluctuation" and 
cites seasonal changes in demands for particular commodi- 
ties. As Goschen proves, however, when fluctuations in 
those circumstances are voider there must be depreciation 
in the Legal Tender Money of the prejudiced country. 

Mr. McKenna further modifies his so-called rule by 
saying : " The rule only applies to nations which have a 
substantial import and export trade." 

But is it not obvious that such a rule, if it were truly 
a rule, would apply wherever there is any import and export 
trade, and not merely in countries where that kind of trade 
is substantial ? And is it not apparent that the state of 
the import and export trade between all countries to-day 
is being determined almost wholly by the ratio of foreign 
exchanges ? 

Mr. McKenna takes the case of Germany as a country 
having little or no such trade to-day and incidentally makes 
an interesting remark. He says : '* The value of the mark, 
which formerly was !«., is now about Id." A little earlier 
he had stated currency " derives its value from the law 
which declares it to be Legal Tender." We are therefore to 
presume that the German Law of Legal Tender designedly 
made the value of the mark a penny instead of a sliilling I 

Throwing this nde overboard, he says : " There nmst 
be some other cause for the great decline in the mark, and 
we have not far to go to find it." 

This " find " is apparently no more than that " the 
demand for foreign imports is abnormally great and the 
power to pay for imports is comparatively small " 1 

The mark of to-day is a different mark altogether from 
the mark which used to be worth a shilling, just as our 
£1 Treasury Note is a different £1 altogether from the coin 



124 "BROADSHEETS" ON NATIONAL FINANCE 

which used to be worth £1 ; but Mr. McKenna does not 
give that cogent reason as any reason for the great decHne 
of the mark in value ! 

He says that the seller of goods to Germany only 
consents to take marks at a greatly depreciated rate of 
exchange because he has to hold them for an indefinite 
period until the German power of production is restored. 
But this does not cause the low value of the mark. It is 
an effect of the low value. If the marks were sound Legal 
Tender correspondingly fewer of them would be accepted 
despite German incapacity to pay in commodities. The 
number of marks actually taken is determined in an over- 
whelming degree by the lack of standard-gold-backing to 
Legal Tender Marks, not by the cozening of any particular 
seller into a consenting frame of mind. 

It is an instance of the influence of unsound Legal 
Tender Currency on rates of exchange. 

Mr. McKenna states that " America does not wish 
to take an obligation to pay reckoned in British Currency 
unless this currency is sold to them at a reduced rate of 
exchange." But this again is because the standard gold 
behind British Legal Tender Money is less than that behind 
American Legal Tender Money. Beyond comparatively 
small differences to which Goschen refers, as above, the 
rate of this American exchange can be practically normalized 
by so reducing the quantity of our paper Legal Tender 
that it will be brought to parity with the standard gold 
which we possess. 

Clearly the nature of Legal Tender Moneys, far more 
than any other consideration, determines the price of all 
commodities, including that of gold and of obligations 
to pay reckoned in any currency. Clearly also, general 
price-levels, whatever they may rise or fall to in connexion 
with supply and demand, cannot be but very largely the 
result of the character of Legal Tender Moneys. Under 



"BROADSHEETS" ON NATIONAL FINANCE 125 

tlicsc circumstances, Mr. McKcnna*s case that General 
Price-Levels determine the ratio of foreign exchange, whilst 
price varies with production, purchasing power and velocity 
of expenditure, or the rate at which the national income is 
spent ; and that therefore, by inference, production, pur- 
chasing power and velocity of expenditure, or the rate at 
which the national income is spent, determine the ratio of 
foreign exchange, is almost wholly a myth. 

The fact is that as the nature of our Legal Tender 
Money mainly determines our rates of foreign exchange 
and also our prices, so it determines as well our production, 
purchasing power and velocity of expenditure, or the rate 
at which the national income is spent. 

Take PURCHASING POWER, which Mr. McKenna 
regards as " the total of bank deposits and money in cir- 
culation." When prices rise, purchasing power, whatever 
its nominal amount, inevitably decreases ; the purchasing 
power of a nominal pound note certainly decreases when it 
will buy only 2 fowls at 10*. each, instead of 5 fowls at 4*. 
each ; or one pair of shoes at 20^., instead of two pairs of 
the same shoes at 10*. per pair. Now when the Legal 
Tender Money, in terms of which both the said purchasing 
power and prices must be named, has been itself reduced 
in intrinsic value by half, it becomes obvious that prices 
and purchasing power must be nominally doubled in order 
to represent truly the previous relationship ; and when it 
is known that the financial documents and obligations 
underlying all the transactions in commodities to which 
purchasing power and prices can have reference are being 
constantly subjected to the acid test of parity with standard 
gold it should become equally obvious that both in theory 
and in practice the nature of our Legal Tender Money 
determines prices and through prices determines purchasing 
power. 

Next, take PRODUCTION. Owing to both natural 



126 "BROADSHEETS" ON NATIONAL FINANCE 

and artificial inequalities in production the inflation of 
prices, through depreciation of Legal Tender Money, operates 
without any propriety or sense of proportion, and thus, 
in business after business, costs are caused to exceed values, 
until prices which seem Uke attempted robbery have to be 
charged, or production must cease. At such times busi- 
nesses with no control over the cost of living collapse under 
demands forced upon them hy the cost of living. 

Production is thus restricted, supplies reduced, and 
prices rendered inordinately high by reason of the deprecia- 
tion of our Legal Tender Money. This is happening now 
when more and cheaper production is the crying need of 
the day. 

That the VELOCITY OF EXPENDITURE, or the 
rate at which our national income is spent, is due to the same 
cause — depreciation of our Legal Tender Money — goes 
without saying. It not only raises prices directly, but by 
reducing suppUes it raises them indirectly too. Nowadays, 
from this cause alone, a lot of money goes a very little way, 
whether the money be that of the Government or of the 
private individual. The depreciation of our Legal Tender 
Money has produced conditions which give money wings 
that make it fly, and for millions of the people make it a 
mockery to talk to them of Saving ! 

Therein lies the irony of the methods for reducing 
prices proposed by Mr. McKenna, as follows : — 

(1) Save larger proportion of income. 

(2) Increase production by harder work. 
(8) Diminish purchasing power. 

(4) By the power of the Government over Taxation. 

He does not suggest the greatest method of all, that 
we shall make our Legal Tender Money sound, which it is 
well within the power of the Government to do, if short- 
sighted Financiers wiU permit them — Financiers who, but 
for the support of the Government, would be of small accoimt. 



"BROADSHEETS" ON NATIONAL FINANCE 127 

It is not to the restoration of sound Legal Tender that these 
Financiers object, but to a certain admission of others 
into the magic circle of credit that must now inevitably 
po with it. 

Production would then be increased by increasing 
the instruments of production ; purchasing power might 
be nominally decreased whilst actually increased, a larger 
proportion of income could be saved because a smaller 
proportion of income would be required for living expendi- 
ture and the Government could reduce taxation generally 
by being able to obtain its requirements for less money, 
and specially by enabling a greater number of individuals 
to pay without impoverishment. 

Best of all we should be the arbiters of our own fate, 
not dependent as we must be, according to Mr. McKcnna*s 
methods, upon expenditure being *' reduced " in ALL 
countries. One wonders, if all exf>enditure in all countries 
were suddenly to CEASE, where the world would be ! 

Mr. McKenna says we require more efficient methods 
and strong and certain policies. What these would be, 
or do, one cannot say. But we certainly require strong 
and certain Legal Tender Money 1 

Nationally-guaranteed Credit-right for productive pur- 
poses, based on 50 per cent, of productive properties, accord- 
ing to their gold values, is now essential as a safeguard in 
rapid restoration of sound Legal Tender. Its products 
would soon include a powerful, prosperous people. What 
par of Standard gold is to sound Legal Tender, a powerful 
prosperous people is to a State. 



OPEN LETTER TO THE VICEROY- 
DESIGNATE OF INDIA 

THE RT. HON. THE EARL OF READING, 
P.C, K.C.V.O., G.C.B. 

MY LORD, — In an era of false economics and fictitious 
money, when men of understanding see their 
business imdertakings being sucked into a whirlpool of chaos 
and destruction — at this great crisis in British relations 
with India, your appointment to the high office to which 
you have been called is welcomed by all who appreciate the 
brilliant statesmanship, diplomatic skill, financial knowledge 
and patriotism that the solution of the fundamental problem 
to be solved requires. 

In Great Britain and Ireland, Industry and Finance 
are each approaching a distinctive deadlock, and the cause 
is primarily Legal Tender. 

In India the Crisis is due to the Rupee, the character 
of which was altered in August, 1920, in the first paragraph 
of Section 11 of the Indian Coinage Act of 1906 by sub- 
stituting the word " ten " for " fifteen," thus making the 
sovereign Legal Tender for ten rupees instead of fifteen. 
The clause now stands as follows : — 

Gold coins, whether coined at His Majesty's Royal 
Mint in England or at any Mint estabhshed in pursuance 
of a Proclamation of His Majesty as a branch of His 
Majesty's Royal Mint, shall be legal tender in payment 

128 



" BRO.\DSHEETS " ON NATIONAL FINANCE 129 

or on account at the rate of ten rupees for one sovereign. 
Under Hoarding in Vol. II., Page 814, Palgrave*f 
Dictionary of Political Economy^ the foUovdng appears : 

" The most extensive system of hoarding of which 
there is any record is that which exists in India, and 
has been going on there for a very long period. This 
has undoubtedly arisen from the unscrupulous character 
of former rulers of the country, and the habits induced 
by ages of misgovernmcnt continue to influence the 
people in their present condition of security and under 
their increased opportunities. Both gold and silver, 
in the form of bullion, of coin, and ornaments are hoarded 
by the natives of every class. Estimates as to the 
amount of wealth lying dormant in this way differ very 
much, but the population is so numerous, and the habit 
so universal, that the amount must be very large. 
Enormous hoards are known to be in the possession 
of some of the native princes ; and from the age of some 
of the coins contained among these treasures it is evident 
that the accumulation must have commenced hundreds 
of years ago." 

By this time the value of the gold hoarded and active 
in India must far exceed the value of the silver. 

But all the gold, or claims to gold, possessed in any 
form by those of every class of the population having 
obligations to pay in rupees is now struck down by one- third 
in lawful value. If they offer gold in settlement of those 
obligations they find that what they could recently offer as 
15 rupees they can now offer as no more than 10. If they 
were to part with the gold they would find in the process 
that one-third of it had been confiscated. 

Naturally they decline to part with it in these utterly 
unjust, even if lawful, circumstances. 

The consequence amongst extremists is Sedition and 
amongst moderate people Consternation ; to be followed by 

I 



180 "BROADSHEETS" ON NATIONAL FINANCE 

stagnation in trade, financial failures, robbery, murder, 
famine and pestilence — all in due succession. 

For as the gold in India disappears its purchasing power 
will disappear, too, and its efficacy in the promotion of trade 
will be absolutely paralysed. 

The gold supporting the paper rupee will disappear. 
The paper rupee will become depreciated and the purchasing 
power (equivalent to 2s.) with which it was to be endowed, 
by a foolish statute, will fail to materialize. 

Ten rupees, rated at ten to a sovereign, will no more 
buy other commodities than it will buy gold. Law may 
take the horse to the water but cannot make it drink. In 
this case Law will better preserve respect for itself by 
retracing its steps. 

Whilst the vast majority of the nation suffer, silver- 
dealers alone smile and rub their hands. 

The silver rupee and half-rupee is legal tender in India 
for any amount, and under the Statute referred to ten silver 
rupees may be offered as the equivalent of either a sovereign 
or £1 — a distinction with a difference I 

But that which will in fact be obtainable either here 
or there for Ten Silver Rupees will not be equal to the weight 
of fine gold in a sovereign, but instead to no more than the 
amount of fine gold in ten-thirty-secondths of a sovereign. 
Why ? At the present relative values of gold and silver 
in British Legal Tender one unit of gold is equal to more 
than 32 units of silver, gold being quoted at £5 135. Sd. per 
ounce and silver at Ss. 5|d. To create a false ratio of 10 to 1 
instead of 32 to 1, claiming a rupee to be one- tenth instead 
of one-thirty-secondth of a sovereign, though it may be 
good for silver dealers and enable the Mint to score in coinage, 
is rather slim than honest and would be wholly unworthy 
of a Gk)vernment, even if it could be made a lasting measure. 

The present Government of India may lend a willing 
ear to those of its advisers who desire to maintain an artificial 



"BROADSHEETS" ON NATIONAL FINANCE 181 

value of silver. It is probably tempted to do this by the 
profit or seigniorage which accrues from the coinage of the 
metal. It is officially stated that the rupee coinage of the 
Indian financial year 1919-1920 (coinage ranking as unlimited 
Legal Tender) amounted to 87,05 lacs, involving nearly 188 
million ounces of standard silver, which means that the cost 
of each rup>ee was less than Is. 8d., while the coin received a 
face value of 28. ; or that in total the cost was about 
£22,000,000, which was endowed by legal magic with a legal 
value of over £87,000,000. 

It should be noted that no legal enactment under these 
conditions can make the real value of the rupee, whatever 
its nominal value, more than 1*. 8d. ; and, further, that this is 
not a pre-war 1*. 3d., but one which is much depreciated below 
pre-war value. 

Under the change in the Coinage Act alluded to, not 
only is this £22,000,000 in silver made Legal Tender for 
£87,000,000, but it is raised to an equahty with more than 
£50,000,000 in gold, for that amount of gold is not permitted 
to be Legal Tender for more than £87,000,000. 

This is worked out as follows : 

£22,000,000=188,000,000 ounces of Silver at Ss. 5jd. per 
ounce. 

188,000,000 ounces of Silver =Rs.87,05,00,000, or 87,05 
lacs of rupees. 

Rs.87,05,00,000 . . . . =87,050,000 Sovereigns at 

10 Rupees to the Sovereign. 

87,050,000 Sovs. .. =about 8,750,000 fine 

ounces of Gold. 

8,750,000 fine ounces of Gold = about £50,000,000 at the 
market price of £5 18^. 8d. per ounce. 

But the serious character of the subtle manipulation of 
Indian Legal Tender in favour of silver-dealers may be made 
even more apparent. 

According to the true ratio of the metals in the market 



182 "BROADSHEETS" ON NATIONAL FINANCE 

one ounce of gold is worth more than 32 ounces of silver, 
gold is worth thirty-two times silver ; £22,000,000 in silver 
should be regarded as one-thirty-secondth part of thirty-two 
times itself ; that is, it should be regarded as merely 
£22,000,000. Yet it is in fact regarded as one-TENTH of 
thirty-two times itself, or £70,400,000, nearly three times its 
true value. 

This method of calculation, based on the purchasing 
power of both silver and gold, expresses the full advantage 
which the instigators of the change in the Statute vainly 
tried to confer on silver at the expense of gold. When gold 
is not allowed to pass current at its full value whilst an 
attempt is made to force silver to pass current at three times 
its full value, intelligent Indians must have disquieting ideas 
of the sense of justice of the British Government of India. 
The Statute has made not value but trouble ! 

It is not surprising that India is seething with discontent. 

The price of this futile effort to defy the laws of equahty 
will be the loss of India ! — unless your Lordship arrives 
there in time to " stop the rot." 

The economic position of this country in relation to 
India now is that India cannot buy our goods, goods already 
supplied she cannot pay for, 30-day bills are running for 
120 days, because Bankers dare not press for settlement lest 
a panic should ensue ; and quotations for supplies to India 
by foreign countries not called upon to underrate our gold 
or overrate our silver in legal tender imdercut our prices 
in amazing ways. 

In the case of goods from the same British catalogue 
the Continent is quoting in Sterling at 40 per cent below 
catalogue price whilst firms here must quote 27^ per cent, 
above catalogue price! But though the British Trader is 
thus sacrificed even then India cannot buy ! 

To save India for the Empire, my Lord, and to help to 
save the Empire, look to this unscrupulous manipulation of 



" BROADSHEETS " ON NATIONAL FINANCE 188 

Money and Credit. India requires a single standard of value. 
The Gold Rupee. This Rupee must be a proportionate 
part of the standard gold contained in a sovereign ; one> 
fifteenth or one-tenth, as you will. But it must be the only 
unlimited Legal Tender. 

It may be made of paper issued against gold, paper 
which must as quickly as possible be based wholly on gold. 
The necessary token coinage may be of nickel and bronze. 
Silver must be left to itself as a mere conmiodity. In its 
capacity as a commodity, and with some help from the 
Government where the help is deserved, it will still serve 
as a medium of exchange without being endowed with the 
quality of Legal Tender. The cost of the help given will be 
the price of saving India, and the help will be due to those 
who honestly believed as a consequence of the action of the 
Government of India that the silver rupee was really worth 
one- tenth of a golden sovereign. 

Gold standard values in both this country and India 
will loosen the trading deadlock. Continental legal tender 
might be at a still heavier discount in Sterling, and Sterling 
would buy more Continental legal tender in the same way 
as it would buy more of everything. But India could buy ; 
business could be done. Even if it were done by the Con- 
tinent, it would not be because the Sterling obtained would 
enable the Continent to buy its own Legal Tenders but more 
importantly because the Continent could use the sterling 
and its great purchasing power for the purchase of more 
goods either in this country or in India itself, thus bestirring 
trade in the one or the other or in both. 

I take leave to subscribe myself. 
My Lord, 
One of your Admirers and WeU-Wishers. 



WILL GERMANY WIN YET ? 

INDEMNITY AND CARRYING TRADE 

To THE Editor of " The Daily Telegraph." 

SIR, — The proposed settlement of the German indemnity 
has brought this country to the edge of a precipice. 
One can only hope that Mr. Lloyd George " convinced against 
his will is of the same opinion still." 

In practice the debt must be paid by the purchase 
and remittance by Germany of bills of exchange drawn on 
the Alhed countries. German exporters, having bills to sell 
drawn on London or Paris, for example, will profit by the 
abnormal demand for these bills by the German Government 
for indemnity payments. This demand, expressed in much- 
diluted legal tender, will send the bills to a patchwork 
premium. The premium will enable the German exporter 
to undersell his rivals in other countries. These exports, 
encouraged by the Governments of the receiving countries 
in the interests of the indemnity, will undermine the home 
industries of those countries. If a tariff wall is erected to 
keep out the offending exports, the indemnity cannot be 
paid. The Allied countries are thus placed on the horns of a 
dilemma. They must either suffer in trade or be disappointed 
of their indemnity. 

In these circumstances it may be that the true object 
of the proposed 12 1 per cent, tax on German exports is to 
circtunvent this possibility of Allied industries being imder- 

134 



"BROADSHEETS" ON NATIONAL HNANCE 185 

sold. Does that settle the question ? Twelve and a half per 
cent, in being added to the price of the goods must diminish 
the chance of their materializing as exports. If the 12 1 per 
cent, were not added to the price of the goods, this part of 
the indemnity would be payable by exporters alone. But 
the export trade could not survive such discrimination against 
it. Exporters would go out of business. The German 
Government might, of course, commandeer goods for export, 
and so endeavour to carry on the export trade ; but that 
would necessitate a Conmiunist or Bolshevik regime. Even 
then, however, the proposed importing countries as repre- 
sented by individual traders might not buy goods with 12 J 
per cent, added to their price ; not to speak of a possible 
tariff against them. 

The German export trade may, therefore, be destroyed. 
But if it is destroyed, how can any indemnity be paid ? If 
nothing comes from Germany, nothing is paid. Anything 
that comes must be in the form either of goods exported or 
transport charges or travellers' expenses in Germany, or the 
transfer free of charge of foreign securities owned by Germany. 
With her export trade destroyed and her foreign securities 
hypothecated or sold, as they have been, her only chance of 
paying the indemnity can come from services rendered, e.g., 
if the rest of the world make Germany the great highway of 
the European continent, diverting to her railways and 
rapidly-growing mercantile marine the major p>ortion of 
its carrying trade, thus gratifying her pre-war ambitions. 
When she had supplanted Great Britain in this great service, 
bills being drawn against it and remitted in redemption of 
her debt for a period long enough to put those engaged in 
our carrying trade out of business, what would become of 
the balance of the indemnity ? What would Great Britain 
have gained from 22 per cent, of the paid-up part of the 
indemnity against the loss in wealth and power that the loss 
of her carrying trade would involve ? To whom would the 



186 "BROADSHEETS" ON NATIONAL FINANCE 

power, and ultimately the wealth, have accrued ? Who, in 
fact, would have won the war ? 

It may be contended that the 12 1 per cent, will not 
interfere with the export trade, because the tax will be 
imposed, not on exporters in particular, but on the German 
community in general, to an amount regulated by 12 1 per 
cent, on the value of the exports. But the payment over 
to the Allies is the crux of the question. The German 
Government might export on its own account in order to 
obtain credits to the 12 1 per cent, extent in the countries 
where its payments were due. But it would thus enter into 
competition with the exporters of its own country. This 
would have serious effects on the general export trade, 
including that against which the bills had to be drawn that 
the German Government hoped to buy for use in settlement 
of the fixed indemnity instalments. In order to avoid this, 
the payment over to the Allies would again take the form 
of the purchase of bills drawn mainly against carrying 
charges, if the payment were made at all. 

UNDESIRABLE ALTERNATIVES 

Under the present scheme of reparation or indemnity 
the Allies are therefore confronted with three undesirable 
alternatives : 

1. The undermining of their industries. 

2. The loss of their carrying trade, plus the gain of it 
by Germany. 

8. The cancellation of the indemnity by the Allies or 
the repudiation of it by a strong Germany. 

Even if Germany had not eventually the will to repudiate 
such an indenmity it would sooner or later, from purely 
economic considerations, be confronted with the necessity 
of doing so. 

The indemnity is as follows: 



"BROADSHEETS" ON NATIONAL FINANCE 187 

Annuities, bearing no interest, which constitute ftxed 
instahnents : 

2 of £100,000,000 each = £200,000,000 

8 of £150,000,000 „ =« £450,000,000 

8 of £200,000,000 „ = £600,000,000 

8 of £250,000,000 „ = £750,000,000 

81 of £800,000,000 „ = £9,800,000,000 



42 £11,800,000,000 

In addition to this, the German people must pay 12| 
per cent, on the value of their exports. The normal value 
of these before the war was about £400,000,000 per annum ; 
12 J per cent, on forty-two times £400,000,000 must therefore 
be added. This is one-eighth of £16,800,000,000, or a 
further £2,100,000,000, bringing the positive total up to 
£13,400,000,000, payable in forty-two years. 

But this indemnity has a negative aspect. To its 
deprivations should be added the further deprivation of that 
part of income which is normally reinvested in the develop- 
ment of industry, the absence of which would progressively 
reduce the paying capacity of Germany simultaneously with 
the increase of its obligations. If internal debt in Germany 
must be repudiated, it is certain, despite either actual or 
threatened pimitive measures, that external debt must be 
repudiated also, because the repudiation of internal debt 
would destroy the capacity to redeem external debt. But 
if internal debt is not to be repudiated, the colossal weight 
of such an external debt cannot in addition be borne. The 
two together would render industry futile as an occupation 
to the masses of individuals required to carry it on. National 
industrial paralysis would ensue. At the earhest opportunity, 
compelled by necessity, the German people, united to a man, 
would shake itself free from the domination and the debt of 
the Allies. 

That must be the outcome if Germany agrees to, and the 



188 "BROADSHEETS" ON NATIONAL FINANCE 

Allies enforce, the form of indemnity now proposed. How- 
ever, there is another method whereby a proper indemnity 
can be paid. The German Government may act as purchas- 
ing agent for the Allied countries, paying for the purchases 
which it may make on their behalf. It may purchase specified 
quantities of agreed merchandise from its own industries 
and supply them at an agreed gold-standard price to the 
Governments of the respective Allied countries, who, again, 
may sell the goods to their own merchants at market price. 
The home credits so derived, the AUied Governments may 
credit to Germany's indebtedness. Next, the German 
(Government may subsidize imports from the respective 
Allied countries of agreed quantities of agreed merchandise, 
and take credit for the gold-standard value of the agreed 
subsidy paid in respect of those imports. A special indemnity 
tax, rather less than the equivalent of the German subsidy, 
must be imposed by the Allies on the merchandise exported 
under these conditions. The nature of the merchandise 
agreed upon for this piirpose must be regulated by the 
economic needs and convenience of the AlUes. 

The quantities of the various kinds of merchandise 
must be hmited to annual proportions that will not seriously 
prejudice the economic exigencies of Germany. In monetary 
terms, £100,000,000 per annum probably represents that 
limit. In 100 years Germany would thus have paid 
£10,000,000,000. No interest should be chargeable except 
upon instalments, the payment of which had not been 
completed within their allotted years. 

There are other means than further help from Germany 
whereby the AUies may speedily ensure their own recovery. 
This country should lead the way, but it has not started yet. 
— Yours, &c. 

January 81, 1921. 



GERMAN INDEMNITY 

NOTES TO BEAllER 
To THE Editor of " The Daily Telegraph." 

SIR, — I observe that, as evidences of her debt, Germany 
is to give notes payable to bearer for the annuities ; 
that these notes are negotiable securities ; that if they arc 
effectively guaranteed the recipients can raise loans on them ; 
and that they will have the endorsement of the Allies, for 
otherwise they would have no market value and nobody would 
lend money on them. All this means that this paper is to 
be circulated in the Allied countries by being made the basis 
of loans obtained by the recipients, who, in the first place, 
are the Governments of the respective AUies, and also the 
guarantors. 

The Allied Governments are, therefore, to put into 
circulation (ierman papjcr, for which good value is to be 
given, in exchange by the nationals of the victorious countries. 
The Allied Goverimients guarantee that this paper is good 
enough to get value out of their own people, although it is 
not good enough yet awhile to get such value out of the 
German people. This is clearly an attempt to make German 
paper as good currency in all the Allied countries, as the 
currency of each country is within its own boundaries ; 
and, moreover, seeing that the German currency is to be 
guaranteed by all the Allies, better currency in each Allied 
country than is the currency of one Allied country in another. 
It is an amazing proposal. If the Allied Governments use 

139 



140 "BROADSHEETS" ON NATIONAL FINANCE 

their power to make German currency practically equivalent 
to legal tender over nearly all Europe, they are serving, not 
a beaten foe, but a conqueror, and giving the best service 
a conqueror could exact. 

This would be too obvious if the almost worthless paper 
marks, which are the direct obligations of the German 
Government, were imported in settlement of the debt for 
the time being, and openly forced upon the pubHc as vaUd 
payment. It would be hard indeed for the public then to 
realize that we had won the war. Yet these evidences of 
debt are no different in principle. Under the circumstances 
one could not be surprised if our Treasury should print off 
Treasury notes at cost of printing to the order of the German 
Government for the amount of our portion of the debt, and 
accept them, for enabling us to pay ourselves what we do not 
owe ourselves but which is owed to us by Germany. 

So much for the fixed instalments of the indemnity. 
On the subject of what was described by the Press unani- 
mously as a 12 1 per cent, export tax, it is interesting to note, 
in the account of an interview in yoiu* issue of to-day with 
Commendatore Giannini, the originator of the idea, that 
this is not an export tax and that it is not 12 1 per cent., 
but 12 per cent. ; also, that it is a percentage on all export 
receipts. It is a percentage that the buyer, whether an Ally 
or a neutral, is not to pay and pass it on to the Allied or neutral 
consumer as he would inevitably have to do in the case of 
a tax on exports properly so-called. Commendatore Giannini 
is, however, playing with the fire he deprecates when he 
proposes that the percentage shall be collected from the 
buyer. The German exporter is to be reimbursed by the 
German Government for the deduction from the payment 
for his goods. That again is a dangerous expedient. It 
savours very much of a subsidy by the German Government 
on Germany's exports to all parts of the world. This would 
be a splendid thing for Germany if all the world would 



"BROADSHEETS" ON NATIONAL FINANCE 141 

stand it. The power of finance through the machinery of 
price-rings is quite capable of arranging who shall actually 
pay that percentage on the subsidized imports from Germany. 

Meanwhile, it is admitted that the Governments who 
will receive the indemnity will receive it in the currencies 
of the Allies, plus the kroner, pesetas, dollars, etc., which 
it is intended foreign and neutral countries shall collect for 
the Allies against goods which Germany is to be paid for. 
When this proposal can be put forward it is not surprising 
that a belief was widely entertained at the Peace Conference 
that the Italian delegates were not as intent as any of the 
other Allies upon making Germany pay. 

The outlines of a real method of obtaining a real indem- 
nity were put forward by me in 1918 and again in my letter 
in your issue of February 1. A striking difference between 
this method and the above is that Germany would have to 
subsidize imports from the Allies into Germany, not exports 
from Germany into the Allied countries. The difference is 
vital. In respect of the exports representing payment of 
indemnity, the German Government would have to pay the 
whole cost in Germany. The Allied Governments would 
receive them free and sell them to their own merchants, 
pocketing the proceeds. — Yours, &c. 

February 2, 1921. 



LEGISLATIVE CORKS ON TROUBLED 
INDUSTRIAL WATERS 

THE TRADE RESOLUTIONS 

Resolution I. — Protection of Key Industries. 
That for a period of five years from the passing of an 
Act for giving effect to this resolution there shall be 
charged on any of the following articles imported into 
Great Britain or Ireland a Customs duty of an amount 
equal to 33j per cent, of the value of the article, that is 
to say : etc. 

Resolution II. — Prevention of Dumping and 
Balancing of Exchanges. 

There shall be charged on any of the following articles 
imported into Great Britain or Ireland, in addition to 
any other duties of Customs chargeable thereon, a 
Customs duty of an amount equal to 33j per cent, 
of the value of the article, that is to say : . . etc. 

IT is true that the trade of the country needs several kinds 
of protection, and now, of all times, protection from 
such resolutions as these. 

Resolution I. provides for a 33 1 per cent. Customs 
Duty on the importation of certain goods which represent 
key industries. 

It provides, therefore, for an equivalent increase in the 
prices of these goods, and also in the prices of goods in the 
industries opened by these keys. 

142 



"BROADSHEETS" ON NATIONAL FINANCE 148 

These prices are already inflated by quotation in incon- 
vertible paper which is the legal tender money of the 
country. 

In the Resolution the words, ** the value of the article,'* 
in order to be properly interpreted, should be " the incon- 
vertible-paper-money-value of the article " — a very different 
factor of the problem. 

The resolution provides, therefore, for raising already 
inflated, uneconomic prices by 88| per cent., further increasing 
the inflation by a portion of this 38 J per cent., and for corre- 
spondingly reducing the buying power of the money which 
the wage-earner and persons of small income must expend 
day by day in order to live. 

The Resolution does not provide that the key industries 
SHALL be carried on in this country and so create more 
employment. 

Tariffs cannot build up Industries on small markets and 
inconvertible paper legal tender. Industries can be erected 
on high or low prices, but not on false pretences in prices. 

The Resolution does not provide that these industries 
shall NOT be removed to places where '* keys " can be 
obtained more cheaply. 

It does not provide that manufacturers SHALL enter 
upon industries dependent upon products which they know 
can be produced more cheaply elsewhere, industries which 
they will have to abandon in five years — a period which is 
neither evanescence nor permanence, but merely prolonged 
anxiety. The Resolution does not provide a sure market 
for these expensive products, although that alone could 
warrant their production. 

All of which means — that it will reduce employment, 
that it will create demands for more doles (the certain symp- 
toms of economic disease), that it will concentrate our vast 
national burdens on fewer industries, and that it will so pro- 
vide the last straws for breaking the backs of the industrial 



144 "BROADSHEETS" ON NATIONAL FINANCE 

camels which are already almost solitary figures in a rapidly 
extending industrial desert. 



Resolution II. provides that on certain goods the afore- 
said inflated paper prices shall be raised in some cases by 
38 1 per cent. +33^ per cent. + (in the case of Indemnity 
goods) 50 per cent. = 116j per cent. 

It provides moreover for a general hold-up of trade in 
the goods affected. 

In this way : 

The Resolution says : " For the purposes of this resolu- 
tion * cost of production ' means the CURRENT STERLING 
EQUIVALENT of the wholesale price at the works in the 
country of manufacture." 

But as SterUng is represented by inconvertible paper 
money, the value of which changes daily and differentJy in 
different places at different times and seasons, and is therefore 
unstable; and as this instability will be added to by efforts 
to give one place an advantage over another at a given time, 
it is plain that fluctuations will be too bewildering to cope 
with and stagnation will result. 

This resolution, again, does not provide that goods, if 
excluded, SHALL be manufactured here. It infers that 
they MAY be, and so may provide employment. 

It does NOT infer what is much more likely, namely, 
that industries especially dependent on some of the goods 
may be forced to take them for a time at any price, until, 
with a few favoured exceptions, they are " down and out." 

THE RESOLUTIONS STRIKE A SUICIDAL BLOW 
AT THIS COUNTRY ! 

THEY WILL STRIKE NO BALANCE IN 
EXCHANGES ! 

BUT THEY WILL STRIKE ALREADY STRICKEN 
COUNTRIES WITH FURTHER INDUSTRIAL 
PARALYSIS 1 



"BROADSHEETS" ON NATIONAL FINANCE 145 

More Industries are needed — more employment is 
wanted — more Financial Liberty is wanted — but the Resolu- 
tions will not bring them. 

Figiu-atively, the resolutions do not put the cart before 
the horse, but they turn the horse in the shafts, facing the 
cart, with wholly mischievous results, the horse quivering 
and frightened, the pinioned men and women in the cart 
angry, while a few big traders motor by smiling at the predica- 
ment of their humbler fellows. 

BEFORE THE NEW CHANCELLOR OF THE 
EXCHEQUER (supposedly the responsible author of the 
resolutions, and said to have blessed the " TER MEULEN ** 
Credit scheme— a crowning iniquity) IS PERMITTED TO 
PILOT THESE RESOLUTIONS THROUGH A FINANCE 
ACT HE SHOULD BE REQUIRED TO EXPLAIN TO 
THE HOUSE OF COMMONS AND THE COUNTRY 
THE TRUE NATURE OF OUR PRESENT LEGAL TEN- 
DER AND THE FUNCTIONS WHICH IT IS ACTUALLY 
PERFORmNG IN TRADE AND BANKING, TO THE 
DETRIMENT OF THE PEOPLE, THE NATIONAL 
INTERESTS, PRODUCTION AND EMPLOYMENT. 

THE TRUTH ON THIS SUBJECT, WITH ITS 
SEMI-LEGAL FICTIONS AND CUSTOMARY FICTIONS, 
WILL REVEAL THE REAL CAUSES OF THE TANGLED 
INDUSTRIAL SKEIN, TO UNRAVEL WHICH MEN 
CAN VAINLY BLUNDER INTO SUCH UNWISE AND 
MERCILESS RESOLUTIONS. 



THE NATIONAL AGONY I 

THIS is great already and will grow much greater. The 
cause is not workers and employers, but misapplied 
power in the hands of so-called statesmen who are merely 
obstinate politicians, ignorant (whatever their educational 
pretensions and attainments) of the A B C of National 
Economics. 

That ignorance is proved by a toleration of inconvertible, 
or partially inconvertible, Legal Tender Paper Money which 
must not be charged to expediency because nothing could 
be less expedient. 

What is a Treasury Note ? It is a Sight Bill of Ex- 
change which by law the public must meet and meet again 
by finding commodity or service value for it EACH TIME 
IT CHANGES HANDS. 

Ordinary bills of exchange, by whomsoever endorsed, 
need not be accepted without ample proof of value. 

A Treasury Note must be accepted irrespective of 
value. 

All bills of exchange, including Treasury Notes, are 
credit instruments. The Credit used is necessarily Banking 
Credit. When Banking Credit, in the judgment of Bankers, 
is too expanded, it has to be contracted. Contraction of 
credit stops the production and circulation of commodities and 
services^ and thus the legal obligation of the pudlic, to meet 
Treasury Notes with commodities and services, is strangled by 
the basic principle of the Treasury Notes themselves! 

The Public are squeezed so unmercifully that even the 

146 



"BROADSHEETS" ON NATIONAL HNANCE 147 

most apathetic of them (not merely miners and Triple Alii' 
ances) are finally forced, as a National Alliance, to show 
fight. 

The Government or the Constitution which has then no 
remedy, except fighting back, is doomed. 

There is a further very vicious aspect of these notes, 
which, in order to avoid particularization too near home, 
I shall illustrate with Federal Reserve Notes. These, in the 
United States, are, like our Treasury Notes, " inconvertible, 
or partially inconvertible, legal tender paper." 

When sellers of goods, not being paid but requiring funds, 
draw bills on their debtors in order to discount the bills ; 
and when buyers of goods, who cannot pay at the time, either 
have bills drawn on them, or give promissory notes, for dis- 
counting purposes, the Bills represent the Debts of Debtors 
who cannot pay for the time being, and the problem they 
present is how to compel some one else to pay until the real 
debtor can conveniently do so. 

To solve the problem, the Banks, with the connivance 
of the Government, expressed in the Federal Reserve Banking 
Law, give, in exchange for the Bills, Federal Reserve Notes. 
These are an obligation forced on the general public in that 
they cannot be refused in business transactions, as private 
Bills may be refused, because to refuse payment offered in 
Legal Tender is unlawful. 

(The Banks make issues of notes on the Bills 

directly, or indirectly through other Discounters, and 

the Federal Reserve Notes are issued to member 

Banks of the Federal Reserve System, although other 

notes are in circulation against the self-same bills ; 

than which, however, we have done even worse.) 

Thus the holders of goods, properties and services, which 

in course of trade they are obliged to sell, are tricked into 

finding the necessary value with which to meet and renew 

Federal Reserve Notes that represent other people's debts. 



148 "BROADSHEETS" ON NATIONAL FINANCE 

Thus, individual members of the public, as long as other 
people deem necessary, pay the debts contracted between 
bank-favoiured buyers and bank-favoured sellers ; for the 
Banks both can and do (and in principle reasonably so) 
discriminate as to the kinds of trade, and the persons carrying 
them on, to be encouraged or repressed. 

This issuance of Legal Tender Notes for Bills, in the 
discounting or re-discounting of the Bills, reaches a Umit 
regulated by a percentage of Bank Reserves to obligations 
—a limit which may be extended by reducing the percentage 
of reserves. 

When the limit is reached no more Legal Tender Notes 
are issued. 

This stops further trading and reduces the necessary 
supply of commodities for circulation. 

Renewals of the Bills and Promissory Notes of the pri- 
mary makers of same leave the trading of these people in 
abeyance, and the Bills revolving. Renewals cannot be 
refused, because if they were a great industrial crisis and 
financial panic would ensue. The maximum issue of notes 
is thu^ maintained whilst trading decreases. 

Commodities being reduced both by consumption and 
by non-renewal, whilst the number of Legal Tender Notes is 
maintained by necessary renewals, the relative commodity 
value of the notes is reduced, and prices proportionately 
rise whilst suppUes of some commodities are not obtainable 
at any price. 

This position may become so acute and menacing that 
not only must renewals be continued, but more Bills must be 
discounted, and further note issues made in order that impera- 
tive suppUes of commodities shall be set going. 

FinaUy, the notes are so relatively numerous that they 
cannot be further increased except to produce Russian con- 
ditions. The Banks' reserves go down to Zero, nobody can 
pretend that the notes can be met by the Banks with any- 



" BROADSHEETS " ON NATIONAL FINANCE 149 

thing but paper, and the public cannot any longer meet them 
with commodities. Industry than ceases and the stacks of 
Legal Tender Paper will buy nothing, either because there 
is notliing to buy or because prices are too high for buyers, 
while lower prices arc too low for sellers. Progressive 
unemployment is the symptom of this development or creeping 
paralysis. 

Under this Legal Tender System 

(1) MEMBERS OF THE PUBLIC GENERALLY 

ARE MADE TO PAY FAVOURED PEOPLE'S 
DEBTS by the discounting' and re-discounting of 
bills with Legal Tender Notes that the members 
of the public are forced, at every exchange, to find 
the value for, at the will of Bankers. 

(2) Prices are forced up by the test of par of standard 
gold constantly and independently of law applied 
to the Notes. 

(8) Prices are forced up or deranged by speculation for 
the rise in foreign exchanges promoted by continued 
legal tender depreciation, or for the fall, by schemes 
for procuring a temporary fall ; 

(4) Increasing issues of notes against decreasing existing 

values prevail. 

(5) Government control adds to the chaos by unbalancing 

trade in obtaining, diverting and stopping supplies, 
as well as by causing deception and adulteration 
and the toleration of worthless substitutes at high 
prices. 

(6) The Money Bubble bursts in Social Disorder. 

The policy of Legal Tender Notes, not properly covered 
by standard gold, is thus a policy based on trickery, leading 
to improper appropriations from and ultimate ruination of 
the general public in the interests of special members of it. 
I can be more expHcit, but that ought to be explicit enough. 

In conclusion, to turn from Federal Reserve Notes baok 



150 "BROADSHEETS" ON NATIONAL FINANCE 

to Treasury Notes, I will not point out how these are operat- 
ing ; or where our Bank Reserves really are ; or what, either 
deliberately or unconsciously, Finance is doing to bleed the 
country white in fruitlessly trying to restore values where 
they are lacking. 

I will not point out how Treasury, National Banks and 
the Bank of England are shifting their obligations ; or how, 
if our Banks do not shut down credit, prices fly up, while if 
they do shut down credit, work tends to a standstill ; or how 
again credit cannot remain as it is. 

For this dilemma the remedy^ — sound money and a 
particular kind of credit-right — is a necessity, not a matter 
of choice for pohtical parties or individuals. In the Coal 
trouble the proper course is to continue the subsidy until the 
remedy can be applied. A mere fight against Communism 
or Nationalization, or the submission to the electorate of a 
question which requires no answer, is not a remedy. 

The silence of men who know all this is amazing. It is 
now guilty silence. May those who are less informed and yet 
have a claim to statesmanship be wise enough in time — there 
is hardly time — to save themselves from being set down in 
history, however undeservedly, as traitors to their country I 



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